UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

Washington,D.C. 20549

FORM 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Forfiscal year ended December 31, 2020

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Fortransition period from __________ to ___________

CommissionFile Number 0-33203

LANDMARKBANCORP, INC.

(Exactname of Registrant as specified in its charter)

Delaware		43-1930755
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

701 Poyntz Avenue , Manhattan , Kansas		66502
(Address of principal executive offices)		(Zip Code)

(785) 565-2000

(Registrant’stelephone number, including area code)

Securitiesregistered pursuant to Section 12(b) of the Act:

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Common Stock, par value $0.01 per share		LARK		Nasdaq Global Market

Securitiesregistered pursuant to Section 12(g) of the Act: None

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes☐ No ☒

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes☐ No ☒

Indicateby check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicateby check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuantto Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submitsuch files).

Yes ☒ No ☐

Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reportingcompany, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Largeaccelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒

Emerginggrowth company ☐

Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicateby check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectivenessof its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registeredpublic accounting firm that prepared or issued its audit report. ☐

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐ No ☒

Theaggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the lastsales price of $23.53 quoted on the Nasdaq Global Market on the last business day of the registrant’s most recently completedsecond fiscal quarter, was approximately $ 74.0 million. On March 19, 2021, the total numberof shares of common stock outstanding was 4,754,361 .

DOCUMENTSINCORPORATED BY REFERENCE

Portionsof the Proxy Statement for the Annual Meeting of Stockholders of the registrant to be held on May 19, 2021, are incorporated byreference in Part III hereof, to the extent indicated herein.

LANDMARKBANCORP, INC.

2020Form 10-K Annual Report

Tableof Contents

ITEM 1.	BUSINESS	3
ITEM 1A.	RISK FACTORS	26
ITEM 1B.	UNRESOLVED STAFF COMMENTS	41
ITEM 2.	PROPERTIES	41
ITEM 3.	LEGAL PROCEEDINGS	41
ITEM 4.	MINE SAFETY DISCLOSURES	41
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	42
ITEM 6.	SELECTED FINANCIAL DATA	43
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	43
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	55
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	57
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	97
ITEM 9A.	CONTROLS AND PROCEDURES	97
ITEM 9B.	OTHER INFORMATION	97
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	98
ITEM 11.	EXECUTIVE COMPENSATION	98
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	99
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	99
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	99
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	100
ITEM 16.	FORM 10-K SUMMARY	102
SIGNATURES		103

PARTI.

ITEM1. BUSINESS

TheCompany

LandmarkBancorp, Inc. (the “Company”) is a financial holding company that was incorporated under the laws of the State ofDelaware in 2001. Currently, the Company’s business consists of the ownership of Landmark National Bank (the “Bank”)and Landmark Risk Management, Inc., which are wholly-owned subsidiaries of the Company. As of December 31, 2020, the Company had$1.2 billion in consolidated total assets.

TheCompany is headquartered in Manhattan, Kansas, and has expanded its geographic presence through opening new branches and pastacquisitions. In May 2019, the Bank opened a loan production office in Prairie Village, Kansas. During the third quarter of 2019,the loan production office was converted into a branch office. The Company continues to explore opportunities to expand its bankingmarkets through mergers and acquisitions, as well as branching opportunities.

TheBank has continued to focus on increasing its originations of commercial, commercial real estate and agricultural loans, whichmanagement believes will be more profitable and provide more growth for the Bank than traditional one-to-four family residentialreal estate lending. Additionally, greater emphasis has been placed on diversification of the deposit mix through the expansionof core deposit accounts such as checking, savings, and money market accounts. The Bank has also diversified its geographicalmarkets as a result of its acquisitions and branching opportunities. The Company’s main office is in Manhattan, Kansas.The Company has 30 branch offices in 24 communities across the state of Kansas.

LandmarkRisk Management, Inc., which was formed and began operations on May 31, 2017, is a Nevada-based captive insurance company thatprovides property and casualty insurance coverage to the Company and the Bank for which insurance may not be currently availableor economically feasible in the insurance marketplace. Landmark Risk Management, Inc. is subject to the regulations of the Stateof Nevada and undergoes periodic examinations by the Nevada Division of Insurance. As of May 31, 2019, Landmark Risk Management,Inc. exited the pool resources relationship of which it was previously a member. On October 1, 2020, Landmark Risk Management,Inc. joined a new pool and resumed providing insurance to the Company and the Bank.

Theresults of operations of the Bank and the Company are dependent primarily upon net interest income and, to a lesser extent, uponother income derived from sales of one-to-four family residential mortgage loans, loan servicing fees and customer deposit services.Additional expenses of the Bank include general and administrative expenses such as salaries, employee benefits, federal depositinsurance premiums, data processing, occupancy and related expenses.

Depositsof the Bank are insured by the Deposit Insurance Fund (the “DIF”) of the Federal Deposit Insurance Corporation (the“FDIC”) up to the maximum amount allowable under applicable federal laws and regulations. The Bank is regulated bythe Office of the Comptroller of the Currency (the “OCC”), as the chartering authority for national banks, and theFDIC, as the administrator of the DIF. The Bank is also subject to regulation by the Board of Governors of the Federal ReserveSystem (the “Federal Reserve”) with respect to reserves required to be maintained against deposits and certain othermatters. The Bank is a member of the Federal Reserve Bank of Kansas City and the Federal Home Loan Bank (the “FHLB”)of Topeka.

TheCompany’s executive office and the Bank’s main office are located at 701 Poyntz Avenue, Manhattan, Kansas 66502. Thetelephone number is (785) 565-2000.

MarketAreas

TheCOVID-19 pandemic in the United States has had and continues to have a complex and significant adverse impact on the economy,the banking industry and the Company, all subject to a high degree of uncertainty for future periods. The Bank’s productsand services are offered primarily in Kansas, where individual and governmental responses to the COVID-19 pandemic led to a broadcurtailment of economic activity beginning in March 2020 as a result of a stay-at-home order, which was lifted on May 3, 2020,with economic and social gatherings reopening in a phased-in approach since then. The re-opening of the economy in Kansas initiallyresulted in increased cases of COVID-19, and additional restrictions were put in place to slow the spread. While case numbershave declined, these measures have had an impact on the economy of and customers located in Kansas. The Bank and its brancheshave remained open during these orders because banks have been deemed essential businesses. The Bank is currently serving itscustomers through its digital banking platforms and drive-thru services, with most branch lobbies re-opened to customers. TheBank will continue to monitor the situation to protect the safety and well-being of our customers and associates.

TheBank’s primary deposit gathering and lending markets are geographically diversified throughout central, eastern, southeast,and southwest Kansas. The primary industries within these respective markets are also diverse and dependent upon a wide arrayof industry and governmental activity for their economic base. A brief description of the four geographic areas and the communitieswhich the Bank serves is set forth below.

Thecentral region of the Bank’s market area consists of the Bank’s locations in Auburn, Junction City, Manhattan, OsageCity, Topeka and Wamego, Kansas and includes the counties of Riley, Geary, Osage, Pottawatomie and Shawnee. The economies aresignificantly impacted by employment at Fort Riley Military Base in Junction City and Kansas State University, the second largestuniversity in Kansas, which is located in Manhattan. Topeka is the capital of Kansas and strongly influenced by the governmentof the State of Kansas. Topeka and Manhattan are regional destinations for retail shopping as well as home to regional hospitals.Manhattan was also selected as the site of a new National Bio and Agro-Defense Facility, which has had a significant impact onthe regional economy as the facility is being constructed, and that impact is expected to continue once the facility begins operations.Construction of the facility began in 2013, and the facility is expected to be fully operational in December 2022. Additionally,manufacturing and service industries play a key role within the central Kansas market.

TheBank’s eastern Kansas branches are located in the communities of Lawrence, Lenexa, Louisburg, Osawatomie, Overland Park,Paola, Prairie Village and Wellsville, Kansas. The Bank’s Lawrence locations are located in Douglas County and are significantlyimpacted by the University of Kansas, the largest university in Kansas. The eastern region is strongly influenced by the KansasCity metropolitan market, which is the highest growth area in the State of Kansas. The region is influenced by public and privateindustries and businesses of all sizes. In addition, housing growth and commercial real estate are major drivers of the region’seconomy. The Bank added commercial lenders in this market and opened a new branch in Prairie Village during 2019. These additionshave significantly contributed to the Bank’s growth in loans and deposits.

Thesoutheast region of the Bank’s market area consists of the Bank’s locations in Fort Scott, Iola, Kincaid, Mound Cityand Pittsburg, Kansas. Agriculture, oil, and gas are the predominant industries in the southeast Kansas region. Both Fort Scottand Pittsburg are recognized as regional commercial centers within the southeast region of the state, which attracts small retailbusinesses to the region. Additionally, Pittsburg State University and Fort Scott Community College attract a number of individualsfrom the surrounding area to live within the communities to participate in educational programs and pursue a degree. Additionally,manufacturing and service industries play a key role within the southeast Kansas market.

TheBank’s southwest Kansas branches are located in the communities of Dodge City, Garden City, Great Bend, Hoisington and LaCrosse,Kansas. Agriculture, oil, and gas are the predominant industries in the southwest Kansas region. Predominant activities involvecrop production, feed lot operations, and food processing. Dodge City is known as the “Cowboy Capital of the World”and maintains a significant tourism industry. Both Dodge City and Garden City are recognized as regional commercial centers withinthe state with small businesses, manufacturing, retail, and service industries having a significant influence upon the local economies.Additionally, the Dodge City, Garden City and Great Bend communities each have a community college that attracts individuals fromthe surrounding areas.

Competition

TheCompany faces strong competition both in attracting deposits and making real estate, commercial and other loans. Its most directcompetition for deposits and loans comes from large national and regional banks, local community banks, savings and loan associations,securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market mutual funds, creditunions, financial technology (fintech) companies and other non-bank financial service providers located in its principal marketareas, including many larger financial institutions which have greater financial and marketing resources available to them. Theability of the Company to attract and retain deposits generally depends on its ability to provide a rate of return, service levels,liquidity and risk comparable to or better than those offered by competing investment opportunities. The Company competes forloans principally through the interest rates and loan fees it charges and the efficiency and quality of services it provides borrowers.

Employees

AtDecember 31, 2020, the Bank had a total of 292 employees (282 full time equivalent employees). The Company has no employees, althoughthe Company is a party to several employment agreements with executives of the Bank. Employees are provided with a comprehensivebenefits program, including basic and major medical insurance, life and disability insurance, sick leave, and a 401(k) profitsharing plan. Employees are not represented by any union or collective bargaining group, and the Bank considers its employee relationsto be good.

LendingActivities

General . The Bank strives to provide a full range of financial products and services to small- and medium-sized businesses and to consumersin each market area it serves. The Bank targets owner-operated businesses and utilizes Small Business Administration (SBA) lendingas a part of its product mix. The Bank has a loan committee for each of its markets, which has authority to approve credits withinestablished guidelines. Concentrations in excess of those guidelines must be approved by either a corporate loan committee comprisedof the Bank’s Chief Executive Officer, the Credit Risk Manager, and other senior commercial lenders or the Bank’sboard of directors. When lending to an entity, the Bank generally obtains a guaranty from the principals of the entity. The loanmix is subject to the discretion of the Bank’s board of directors and the demands of the local marketplace.

Thefollowing is a brief description of each major category of the Bank’s lending activity.

One-to-FourFamily Residential Real Estate Lending . The Bank originates one-to-four family residential real estate loans with bothfixed and variable rates. One-to-four family residential real estate loans are typically priced and originated following underwritingstandards that are consistent with guidelines established by the major buyers in the secondary market. Generally, residentialreal estate loans retained in the Bank’s loan portfolio have fixed or variable rates with adjustment periods of seven yearsor less and amortization periods of typically either 15 or 30 years. A significant portion of these loans prepay prior to maturity.The Bank has no potential negative amortization loans. While the origination of fixed-rate, one-to-four family residential loanscontinues to be a key component of our business, the majority of these loans are sold in the secondary market. One-to-four familyresidential real estate loans that exceed 80% of the appraised value of the real estate generally are required, by policy, tobe supported by private mortgage insurance, although on occasion the Bank will retain non-conforming residential loans to knowncustomers at premium pricing. The balances of one-to-four family residential real estate loans increased as of December 31, 2020compared to December 31, 2019 as the Bank decided to retain additional loans as an alternative to purchasing investment securities.While the Bank retains some of the new loan originations, most of the new loans continue to be sold.

Constructionand Land Lending. Loans in this category include loans to facilitate the development of both residential and commercialreal estate. Construction and land loans generally have terms of less than 18 months, and the Bank will retain a security interestin the borrower’s real estate. Construction loans are generally limited, by policy, to 80% of the appraised value of theproperty. Land loans are generally limited, by policy, to 65% of the appraised value of the property. The origination of constructionand land loans has not been a primary strategy of the Bank over the past few years to reduce risk in the Bank’s loan portfolio.The balances of construction and land loans increased as of December 31, 2020 compared to December 31, 2019 as a result of increasedloans to existing customers.

CommercialReal Estate Lending . Commercial real estate loans, including multi-family loans, generally have amortization periods of15 or 20 years. Commercial real estate and multi-family loans are generally limited, by policy, to 80% of the appraised valueof the property. Commercial real estate loans are also supported by an analysis demonstrating the borrower’s ability torepay. The Bank continues to focus on generating additional commercial real estate loan relationships. The Bank’s loan growthover the past few years has been driven in large part by commercial real estate loans. These loans are primarily made to customerswith owner-occupied properties.

CommercialLending . Commercial loans include loans to service, retail, wholesale and light manufacturing businesses. Commercial loansare made based on the financial strength and repayment ability of the borrower, as well as the collateral securing the loans.The Bank targets owner-operated businesses as its customers and makes lending decisions based upon a cash flow analysis of theborrower as well as a collateral analysis. Accounts receivable loans and loans for inventory purchases are generally on a one-yearrenewable term, and loans for equipment generally have a term of seven years or less. The Bank generally takes a blanket securityinterest in all assets of the borrower. Equipment loans are generally limited to 75% of the cost or appraised value of the equipment.Inventory loans are generally limited to 50% of the value of the inventory, and accounts receivable loans are generally limitedto 75% of a predetermined eligible base. The Bank continues to focus its organic growth on generating additional commercial loanrelationships, including SBA loans. The Bank has been able to increase its balances of commercial loans over the past few yearsas a result of recruiting new customer relationships.

PaycheckProtection Program Lending. Starting in 2020, the Bank participates as a lender in the SBA’s Paycheck ProtectionProgram (“PPP”). PPP is a loan program administered through the SBA to help businesses impacted by COVID-19, withthe loans guaranteed by the SBA. The Bank receives an origination fee from the SBA as part of the lending process. The loans havean interest rate of 1.00% plus the amortization of the origination fee. The maturity date of these loans is two or five yearsunless the borrower’s loan is forgiven, in which case the loan may be repaid sooner. The Bank’s ability to originatePPP loans is dependent upon the extent to which the program is authorized by the federal government to continue in future periods.

MunicipalLending. Loans to municipalities are generally related to equipment leasing or general fund loans. Terms are generallylimited to 5 years. Equipment leases are generally made for the purchase of municipal assets and are secured by the leased asset.The Bank is generally not active in the origination of municipal loans and leases; however, the Bank may originate loans or leasesfor municipalities in its market area.

AgricultureLending. Agricultural real estate loans generally have amortization periods of 20 years or less, during which time theBank generally retains a security interest in the borrower’s real estate. The Bank also provides short-term credit for operatingloans and intermediate-term loans for farm product, livestock and machinery purchases and other agricultural improvements. Farmproduct loans generally have a one-year term, and machinery, equipment and breeding livestock loans generally have five to sevenyear terms. Extension of credit is based upon the borrower’s ability to repay, as well as the existence of federal guaranteesand crop insurance coverage. These loans are generally secured by a blanket lien on livestock, equipment, feed, hay, grain andgrowing crops. Equipment and breeding livestock loans are generally limited to 75% of appraised value. The Bank continues to focuson generating additional agriculture loan relationships in each of its market areas. Improvements in the financial results ofthe Bank’s agriculture customers contributed to the decline in these loan balances as of December 31, 2020 compared to December31, 2019.

Consumerand Other Lending . Loans classified as consumer and other loans include automobile, boat, home improvement and home equityloans. With the exception of home improvement loans and home equity loans, the Bank generally takes a purchase money securityinterest in collateral for which it provides the original financing. Home improvement loans and home equity loans are principallysecured through second mortgages. The terms of the loans typically range from one to five years, depending upon the use of theproceeds, and generally range from 75% to 90% of the value of the collateral. The majority of these loans are installment loanswith fixed interest rates. Home improvement and home equity loans are generally secured by a second mortgage on the borrower’spersonal residence and, when combined with the first mortgage, limited to 80% of the value of the property unless further protectedby private mortgage insurance. Home improvement loans are generally made for terms of five to seven years with fixed interestrates. Home equity loans are generally made for terms of ten years on a revolving basis with adjustable monthly interest ratestied to the national prime interest rate. While the Bank primarily provides consumer loans to its existing customers, consumerlending is not a category the Bank targets for organic growth.

LoanOrigination and Processing

Loanoriginations are derived from a number of sources. Residential loan originations result from real estate broker referrals, directsolicitation by the Bank’s loan officers, present depositors and borrowers, referrals from builders and attorneys, walk-incustomers and, in some instances, other lenders. Consumer and commercial real estate loan originations generally emanate frommany of the same sources.

Residentialloan applications are underwritten and closed based upon standards which generally meet secondary market guidelines. The loanunderwriting procedures followed by the Bank conform to regulatory specifications and are designed to assess both the borrower’sability to make principal and interest payments and the value of any assets or property serving as collateral for the loan. Generally,as part of the process, a loan officer meets with each applicant to obtain the appropriate employment and financial informationas well as any other required loan information. The Bank then obtains reports with respect to the borrower’s credit record,and on real estate loans, orders and reviews an appraisal of any collateral for the loan (prepared for the Bank by an independentappraiser).

Loanapplicants are notified promptly of the decision of the Bank. Prior to closing any long-term loan, the borrower must provide proofof fire and casualty insurance on the property serving as collateral, and such insurance must be maintained during the full termof the loan. Title insurance is required on loans collateralized by real property.

TheBank is focusing on the generation of commercial, commercial real estate and agriculture loans to grow and diversify the loanportfolio. During 2020, the Bank was able to generate loan growth across the geographic markets that it serves, primarily in commercialreal estate and commercial loans. In addition, the Bank also generated significant loan growth by originating PPP loans to helpbusinesses impacted by COVID-19.

Supervisionand Regulation

General

FDIC-insuredinstitutions, like the Bank, their holding companies and their affiliates are extensively regulated under federal law. As a result,our growth and earnings performance may be affected not only by management decisions and general economic conditions, but alsoby the requirements of applicable statutes and by the regulations and policies of various bank regulatory agencies, includingour primary regulator, the Federal Reserve, and the Bank’s primary regulator, the OCC, as well as the FDIC, as the insurerof our deposits, and the Consumer Financial Protection Bureau (“CFPB”), as the regulator of consumer financial servicesand their providers. Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accountingrules developed by the Financial Accounting Standards Board (“FASB”), securities laws administered by the Securitiesand Exchange Commission (“SEC”) and state securities authorities, and anti-money laundering laws enforced by the U.S.Department of the Treasury (“Treasury”) have an impact on our business. The effect of these statutes, regulations,regulatory policies and accounting rules are significant to our operations and results.

Federaland state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of FDIC-insuredinstitutions, their holding companies and affiliates that is intended primarily for the protection of the FDIC-insured depositsand depositors of banks, rather than shareholders. These laws, and the regulations of the bank regulatory agencies issued underthem, affect, among other things, the scope of our business, the kinds and amounts of investments we may make, required capitallevels relative to assets, the nature and amount of collateral for loans, the establishment of branches, our ability to merge,consolidate and acquire, dealings with the Company’s and the Bank’s insiders and affiliates and our payment of dividends.In reaction to the global financial crisis and particularly following passage of the Dodd-Frank Wall Street Reform and ConsumerProtection Act (the “Dodd-Frank Act”), we experienced heightened regulatory requirements and scrutiny. Although thereforms primarily targeted systemically significant financial service providers, their influence filtered down in varying degreesto community banks over time and caused our compliance and risk management processes, and the costs thereof, to increase. Then,in May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (“Regulatory Relief Act”) was enactedby Congress in part to provide regulatory relief for community banks and their holding companies. To that end, the law eliminatedquestions about the applicability of certain Dodd-Frank Act reforms to community bank systems, including relieving us of any requirementto engage in mandatory stress tests, maintain a risk committee or comply with the Volcker Rule’s complicated prohibitionson proprietary trading and ownership of private funds. We believe these reforms are favorable to our operations.

Thesupervisory framework for U.S. banking organizations subjects banks and bank holding companies to regular examination by theirrespective regulatory agencies, which results in examination reports and ratings that are not publicly available and that canimpact the conduct and growth of their business. These examinations consider not only compliance with applicable laws and regulations,but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, and various other factors.The regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulatedentity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicablelaw or are otherwise inconsistent with laws and regulations.

Thefollowing is a summary of the material elements of the supervisory and regulatory framework applicable to the Company and theBank, beginning with a discussion of the impact of the COVID-19 pandemic on the banking industry. It does not describe all ofthe statutes, regulations and regulatory policies that apply, nor does it restate all of the requirements of those that are described.The descriptions are qualified in their entirety by reference to the particular statutory and regulatory provision.

COVID-19Pandemic

Thefederal bank regulatory agencies, along with their state counterparts, have issued a steady stream of guidance responding to theCOVID-19 pandemic and have taken a number of unprecedented steps to help banks navigate the pandemic and mitigate its impact.These include, without limitation: requiring banks to focus on business continuity and pandemic planning; adding pandemic scenariosto stress testing; encouraging bank use of capital buffers and reserves in lending programs; permitting certain regulatory reportingextensions; reducing margin requirements on swaps; permitting certain otherwise prohibited investments in investment funds; issuingguidance to encourage banks to work with customers affected by the pandemic and encourage loan workouts; and providing creditunder the Community Reinvestment Act (“CRA”) for certain pandemic-related loans, investments and public service. Becauseof the need for social distancing measures, the agencies revamped the manner in which they conducted periodic examinations oftheir regulated institutions, including making greater use of off-site reviews.

Moreover,the Federal Reserve issued guidance encouraging banking institutions to utilize its discount window for loans and intraday creditextended by its Reserve Banks to help households and businesses impacted by the pandemic and announced numerous funding facilities.The FDIC also has acted to mitigate the deposit insurance assessment effects of participating in the PPP and the Federal Reserve’sPPP Liquidity Facility and Money Market Mutual Fund Liquidity Facility.

Referenceis made to the sections “Item 1A. Risk Factors – COVID-19 Risks” and “Item 7. Management’s Discussionand Analysis of Financial Condition and Results of Operations – Impact of COVID-19” for information on the CoronavirusAid, Relief and Economic Security Act (“CARES Act”), PPP program and the Federal Reserve’s lending facilitiesand for discussions of the economic impact of the COVID-19 pandemic. In addition, information as to selected topics, such as theimpact on capital requirements, dividend payments, reserves and CRA, is contained in the relevant sections of this Supervisionand Regulation discussion provided below.

TheRole of Capital

Regulatorycapital represents the net assets of a banking organization available to absorb losses. Because of the risks attendant to theirbusiness, FDIC-insured institutions are generally required to hold more capital than other businesses, which directly affectsour earnings capabilities. While capital has historically been one of the key measures of the financial health of both bank holdingcompanies and banks, its role became fundamentally more important in the wake of the global financial crisis, as the banking regulatorsrecognized that the amount and quality of capital held by banks prior to the crisis was insufficient to absorb losses during periodsof severe stress. Certain provisions of the Dodd-Frank Act and Basel III, discussed below, establish capital standards for banksand bank holding companies that are meaningfully more stringent than those in place previously.

CapitalLevels. Banks have been required to hold minimum levels of capital based on guidelines established by the bank regulatoryagencies since 1983. The minimums have been expressed in terms of ratios of “capital” divided by “total assets”.The capital guidelines for U.S. banks beginning in 1989 have been based upon international capital accords (known as “Basel”rules) adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as theprimary global standard-setter for prudential regulation, as implemented by the U.S. bank regulatory agencies on an interagencybasis. The accords recognized that bank assets for the purpose of the capital ratio calculations needed to be risk weighted (thetheory being that riskier assets should require more capital) and that off-balance sheet exposures needed to be factored in thecalculations. Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of theBasel Committee on Banking Supervision, announced agreement on a strengthened set of capital requirements for banking organizationsaround the world, known as Basel III, to address deficiencies recognized in connection with the global financial crisis.

TheBasel III Rule . In July 2013, the U.S. federal banking agencies approved the implementation of the Basel III regulatory capitalreforms in pertinent part, and, at the same time, promulgated rules effecting certain changes required by the Dodd-Frank Act (the“Basel III Rule”). In contrast to capital requirements historically, which were in the form of guidelines, Basel IIIwas released in the form of binding regulations by each of the regulatory agencies. The Basel III Rule increased the requiredquantity and quality of capital and required more detailed categories of risk weighting of riskier, more opaque assets. For nearlyevery class of assets, the Basel III Rule requires a more complex, detailed and calibrated assessment of risk in the calculationof risk weightings. The Basel III Rule is applicable to all banking organizations that are subject to minimum capital requirements,including federal and state banks and savings and loan associations, as well as to bank and savings and loan holding companies,other than “small bank holding companies” (generally certain holding companies with consolidated assets of less than$3 billion, which at this juncture does not include us) and certain qualifying banking organizations that may elect a simplifiedframework (which we have not done). Thus, the Company and the Bank are each currently subject to the Basel III Rule as describedbelow.

Notonly did the Basel III Rule increase most of the required minimum capital ratios in effect prior to January 1, 2015, but, in requiringthat forms of capital be of higher quality to absorb loss, it introduced the concept of Common Equity Tier 1 Capital, which consistsprimarily of common stock, related surplus (net of Treasury stock), retained earnings, and Common Equity Tier 1 minority interestssubject to certain regulatory adjustments. The Basel III Rule also changed the definition of capital by establishing more stringentcriteria that instruments must meet to be considered Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stockthat meets certain requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject tolimitations). The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferredtax assets in capital and required deductions from Common Equity Tier 1 Capital in the event that such assets exceeded a percentageof a banking institution’s Common Equity Tier 1 Capital.

TheBasel III Rule required minimum capital ratios as of January 1, 2015, as follows:

	●	A ratio of minimum Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets;
	●	A ratio of minimum Tier 1 Capital equal to 6% of risk-weighted assets;
	●	A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8% of risk-weighted assets; and
	●	A minimum leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.

Inaddition, institutions that seek the freedom to make capital distributions (including for dividends and repurchases of stock)and pay discretionary bonuses to executive officers without restriction must also maintain 2.5% in Common Equity Tier 1 Capitalattributable to a capital conservation buffer. The purpose of the conservation buffer is to ensure that banking institutions maintaina buffer of capital that can be used to absorb losses during periods of financial and economic stress. Factoring in the conservationbuffer increases the minimum ratios depicted above to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% forTotal Capital. The federal bank regulators released a joint statement in response to the COVID-19 pandemic reminding the industrythat capital and liquidity buffers were meant to give banks the means to support the economy in adverse situations, and that theagencies would support banks that use the buffers for that purpose if undertaken in a safe and sound manner.

Well-CapitalizedRequirements . The ratios described above are minimum standards in order for banking organizations to be considered “adequatelycapitalized.” Bank regulatory agencies uniformly encourage banks to hold more capital and be “well-capitalized”and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capitalat levels in excess of minimum regulatory requirements. For example, a banking organization that is well-capitalized may: (i)qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities; (ii)qualify for expedited processing of other required notices or applications; and (iii) accept, roll-over or renew brokered deposits.Higher capital levels could also be required if warranted by the particular circumstances or risk profiles of individual bankingorganizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be requiredto take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of credit, nontraditionalactivities or securities trading activities. Further, any banking organization experiencing or anticipating significant growthwould be expected to maintain capital ratios, including tangible capital positions ( i.e. , Tier 1 Capital less all intangibleassets), well above the minimum levels.

Underthe capital regulations of the Federal Reserve for the Company and the OCC for the Bank, in order to be well-capitalized, we mustmaintain:

	●	A Common Equity Tier 1 Capital ratio to risk-weighted assets of 6.5% or more;
	●	A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more;
	●	A ratio of Total Capital to total risk-weighted assets of 10% or more; and
	●	A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater.

Itis possible under the Basel III Rule to be well-capitalized while remaining out of compliance with the capital conservation bufferdiscussed above.

Asof December 31, 2020, the Bank was not subject to a directive from the OCC to increase its capital and the Bank was well-capitalized,as defined by OCC regulations. As of December 31, 2020, the Company had regulatory capital in excess of the Federal Reserve’srequirements and met the Basel III Rule requirements to be well-capitalized. We are also in compliance with the capital conservationbuffer.

PromptCorrective Action . The concept of being “well-capitalized” is part of a regulatory regime that provides the federalbanking regulators with broad power to take “prompt corrective action” to resolve the problems of undercapitalizedinstitutions based on the capital level of each particular institution. The extent of the regulators’ powers depends onwhether the institution in question is “adequately capitalized,” “undercapitalized,” “significantlyundercapitalized” or “critically undercapitalized,” in each case as defined by regulation. Depending upon thecapital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institutionto submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii)requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restrictingtransactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits;(vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed;(viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divestcertain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointinga receiver for the institution.

CommunityBank Capital Simplification. Community banks have long raised concerns with bank regulators about the regulatory burden, complexity,and costs associated with certain provisions of the Basel III Rule. In response, Congress provided an “off-ramp” forinstitutions, like us, with total consolidated assets of less than $10 billion. Section 201 of the Regulatory Relief Act instructedthe federal banking regulators to establish a single “Community Bank Leverage Ratio” (“CBLR”) of between8 and 10%. Under the final rule, a community banking organization is eligible to elect the new framework if it has: less than$10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a CBLR greaterthan 9%. The bank regulatory agencies temporarily lowered the CBLR to 8% as a result of the COVID-19 pandemic. We may elect theCBLR framework at any time, but have not currently determined to do so.

Regulationand Supervision of the Company

General. The Company, as the sole shareholder of the Bank, is a bank holding company. As a bank holding company, we are registeredwith, and subject to regulation, supervision and enforcement by, the Federal Reserve under the Bank Holding Company Act of 1956,as amended (the “BHCA”). We are legally obligated to act as a source of financial and managerial strength to the Bankand to commit resources to support the Bank in circumstances where we might not otherwise do so. Under the BHCA, we are subjectto periodic examination by the Federal Reserve and are required to file with the Federal Reserve periodic reports of ouroperations and such additional information regarding the Company and the Bank as the Federal Reserve may require.

Acquisitionsand Activities. The primary purpose of a bank holding company is to control and manage banks. The BHCA generally requiresthe prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holdingcompany of another bank or bank holding company. Subject to certain conditions (including deposit concentration limits establishedby the BHCA), the Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States.In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on theaggregate amount of deposits that may be held by the acquiring bank holding company and its FDIC-insured institution affiliatesin the state in which the target bank is located (provided that those limits do not discriminate against out-of-state institutionsor their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time(not to exceed five years) before being acquired by an out-of-state bank holding company. Furthermore, in accordance with theDodd-Frank Act, bank holding companies must be well-capitalized and well-managed in order to effect interstate mergers or acquisitions.For a discussion of the capital requirements, see “—The Role of Capital” above.

TheBHCA generally prohibits the Company from acquiring direct or indirect ownership or control of 5% or more of the voting sharesof any company that is not a bank and from engaging in any business other than that of banking, managing and controlling banksor furnishing services to banks and their subsidiaries. This general prohibition is subject to a number of exceptions. The principalexception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by theFederal Reserve prior to November 11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.”This authority would permit the Company to engage in a variety of banking-related businesses, including the ownership and operationof a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau(including software development) and mortgage banking and brokerage services. The BHCA does not place territorial restrictionson the domestic activities of nonbank subsidiaries of bank holding companies.

Additionally,bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holdingcompanies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities andinsurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretaryof the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or thatthe Federal Reserve determines by order to be complementary to any such financial activity and does not pose a substantial riskto the safety or soundness of FDIC-insured institutions or the financial system generally. We elected to operate as a financialholding company in May 2017. In order to maintain our status as a financial holding company, both the Company and the Bank mustbe well-capitalized, well-managed, and the Bank must have at least a satisfactory CRA rating. If the Federal Reserve determinesthat either we or the Bank is not well-capitalized or well-managed, the Federal Reserve will provide a period of time in whichto achieve compliance, but during the period of noncompliance, the Federal Reserve may place any additional limitations on usthat it deems appropriate. Furthermore, if non-compliance is based on the failure of the Bank to achieve a satisfactory CRA rating,we would not be able to commence any new financial activities or acquire a company that engages in such activities.

Changein Control . Federal law prohibits any person or company from acquiring “control” of an FDIC-insured depositoryinstitution or its holding company without prior notice to the appropriate federal bank regulator. “Control” is conclusivelypresumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company,but may arise under certain circumstances between 10% and 24.99% ownership.

CapitalRequirements. We file consolidated capital reports with the Federal Reserve under the Basel III Rule. For a discussion ofcapital requirements, see “—The Role of Capital” above.

DividendPayments. Our ability to pay dividends to shareholders may be affected by both general corporate law considerations and policiesof the Federal Reserve applicable to bank holding companies . As a Delaware corporation, we are subject to the limitationsof the Delaware General Corporation Law (the “DGCL”). The DGCL allows us to pay dividends only out of its surplus(as defined and computed in accordance with the provisions of the DGCL) or if we have no such surplus, out of its net profitsfor the fiscal year in which the dividend is declared and/or the preceding fiscal year.

Asa general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should eliminate, deferor significantly reduce dividends to shareholders if: (i) the company’s net income available to shareholders for the pastfour quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the prospectiverate of earnings retention is inconsistent with the company’s capital needs and overall current and prospective financialcondition; or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.These factors have come into consideration in the industry as a result of the COVID-19 pandemic, however, the Company’snet income and capital has allowed it to maintain its dividend policy. The Federal Reserve also possesses enforcement powers overbank holding companies and their nonbank subsidiaries to prevent or remedy actions that represent unsafe or unsound practicesor violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividendsby banks and bank holding companies. In addition, under the Basel III Rule, institutions that seek the freedom to pay dividendshave to maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “—The Roleof Capital” above.

MonetaryPolicy. The monetary policy of the Federal Reserve has a significant effect on the operating results of financial or bankholding companies and their subsidiaries, and this is evidenced in its reaction to the COVID-19 pandemic. Among the tools availableto the Federal Reserve to affect the money supply are open market transactions in U.S. government securities and changes in thediscount rate on bank borrowings. These means are used in varying combinations to influence overall growth and distribution ofbank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits.

FederalSecurities Regulation. Our common stock is registered with the SEC under the Securities Act of 1933, as amended, and the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”). Consequently, we are subject to the information, proxy solicitation,insider trading and other restrictions and requirements of the SEC under the Exchange Act.

CorporateGovernance . The Dodd-Frank Act addressed many investor protection, corporate governance and executive compensation mattersthat will affect most U.S. publicly traded companies. It increased stockholder influence over boards of directors by requiringcompanies to give stockholders a nonbinding vote on executive compensation and so-called “golden parachute” payments,and authorizing the SEC to promulgate rules that would allow stockholders to nominate and solicit voters for their own candidatesusing a company’s proxy materials. The legislation also directed the Federal Reserve to promulgate rules prohibiting excessivecompensation paid to executives of bank holding companies, regardless of whether such companies are publicly traded.

Regulationand Supervision of the Bank

General. The Bank is a national bank, chartered by the OCC under the National Bank Act. The deposit accounts of the Bank are insuredby the DIF to the maximum extent provided under federal law and FDIC regulations, currently $250,000 per insured depositor category,and the Bank is a member of the Federal Reserve System. As a national bank, the Bank is subject to the examination, supervision,reporting and enforcement requirements of the OCC, the chartering authority for national banks. The Bank is subject to that authorityand is examined by the OCC. The FDIC, as administrator of the DIF, also has regulatory authority over the Bank.

DepositInsurance . As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC.The FDIC has adopted a risk-based assessment system whereby FDIC-insured institutions pay insurance premiums at rates based ontheir risk classification. For institutions like the Bank that are not considered large and highly complex banking organizations,assessments are now based on examination ratings and financial ratios. The total base assessment rates currently range from 1.5basis points to 30 basis points. At least semi-annually, the FDIC updates its loss and income projections for the DIF and, ifneeded, increases or decreases the assessment rates, following notice and comment on proposed rulemaking.

Thereserve ratio is the FDIC insurance fund balance divided by estimated insured deposits. The Dodd-Frank Act altered the minimumreserve ratio of the DIF, increasing the minimum from 1.15% to 1.35% of the estimated amount of total insured deposits. The reserveratio reached 1.36% as of September 30, 2018, exceeding the statutory required minimum. As a result, the FDIC provided assessmentcredits to insured depository institutions, like the Bank, with total consolidated assets of less than $10 billion for the portionof their regular assessments that contributed to growth in the reserve ratio between 1.15% and 1.35%. The FDIC applied the smallbank credits for quarterly assessment periods beginning July 1, 2019. However, the reserve ratio then fell to 1.30% in 2020 asa result of extraordinary insured deposit growth caused by an unprecedented inflow of more than $1 trillion in estimated insureddeposits in the first half of 2020, stemming mainly from the COVID-19 pandemic. Although the FDIC could have ceased the smallbank credits, it waived the requirement that the reserve ratio be at least 1.35% for full remittance of the remaining assessmentcredits, and it refunded all small bank credits as of September 30, 2020.

SupervisoryAssessments . National banks are required to pay supervisory assessments to the OCC to fund the operations of the OCC. Theamount of the assessment is calculated using a formula that considers the bank’s size and its supervisory condition. Duringthe year ended December 31, 2020, the Bank paid supervisory assessments to the OCC totaling $201,000.

CapitalRequirements. Banks are generally required to maintain capital levels in excess of other businesses. For a discussion of capitalrequirements, see “—The Role of Capital” above.

LiquidityRequirements. Liquidity is a measure of the ability and ease with which bank assets may be converted to cash. Liquid assetsare those that can be converted to cash quickly if needed to meet financial obligations. To remain viable, FDIC-insured institutionsmust have enough liquid assets to meet their near-term obligations, such as withdrawals by depositors. Because the global financialcrisis was in part a liquidity crisis, Basel III also includes a liquidity framework that requires FDIC-insured institutions tomeasure their liquidity against specific liquidity tests. One test, referred to as the Liquidity Coverage Ratio, or LCR, is designedto ensure that the banking entity has an adequate stock of unencumbered high-quality liquid assets that can be converted easilyand immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario. The othertest, known as the Net Stable Funding Ratio, or NSFR, is designed to promote more medium- and long-term funding of the assetsand activities of FDIC-insured institutions over a one-year horizon. These tests provide an incentive for banks and holding companiesto increase their holdings in Treasury securities and other sovereign debt as a component of assets, increase the use of long-termdebt as a funding source and rely on stable funding like core deposits (in lieu of brokered deposits).

Inaddition to liquidity guidelines already in place, the federal bank regulatory agencies implemented the Basel III LCR in 2014and have proposed the NSFR. While these rules do not, and will not, apply to the Bank, we continue to review our liquidity riskmanagement policies in light of developments.

DividendPayments . The primary source of funds for the Company is dividends from the Bank. Under the National Bank Act, a nationalbank may pay dividends out of its undivided profits in such amounts and at such times as the bank’s board of directors deemsprudent. Without prior OCC approval, however, a national bank may not pay dividends in any calendar year that, in the aggregate,exceed the bank’s year-to-date net income plus the bank’s retained net income for the two preceding years. The paymentof dividends by any FDIC-insured institution is affected by the requirement to maintain adequate capital pursuant to applicablecapital adequacy guidelines and regulations, and an FDIC-insured institution generally is prohibited from paying any dividendsif, following payment thereof, the institution would be undercapitalized. As described above, the Bank exceeded its capital requirementsunder applicable guidelines as of December 31, 2020. Notwithstanding the availability of funds for dividends, however, the OCCmay prohibit the payment of dividends by the Bank if it determines such payment would constitute an unsafe or unsound practice.In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends have to maintain 2.5% in Common EquityTier 1 Capital attributable to the capital conservation buffer. See “—The Role of Capital” above.

InsiderTransactions. The Bank is subject to certain restrictions imposed by federal law on “covered transactions” betweenthe Bank and its “affiliates.” The Company is an affiliate of the Bank for purposes of these restrictions, and coveredtransactions subject to the restrictions include extensions of credit to the Company, investments in the stock or other securitiesof the Company and the acceptance of the stock or other securities of the Company as collateral for loans made by the Bank. TheDodd-Frank Act enhanced the requirements for certain transactions with affiliates, including an expansion of the definition of“covered transactions” and an increase in the amount of time for which collateral requirements regarding covered transactionsmust be maintained.

Certainlimitations and reporting requirements are also placed on extensions of credit by the Bank to its directors and officers, to directorsand officers of the Company and its subsidiaries, to principal shareholders of the Company and to “related interests”of such directors, officers and principal shareholders. In addition, federal law and regulations may affect the terms upon whichany person who is a director or officer of the Company or the Bank, or a principal shareholder of the Company, may obtain creditfrom banks with which the Bank maintains a correspondent relationship.

Safetyand Soundness Standards/Risk Management. FDIC-insured institutions are expected to operate in a safe and sound manner. Thefederal banking agencies have adopted operational and managerial standards to promote the safety and soundness of such institutionsthat address internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interestrate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

Ingeneral, the safety and soundness standards prescribe the goals to be achieved in each area, and each institution is responsiblefor establishing its own procedures to achieve those goals. If an institution fails to operate in a safe and sound manner, theFDIC-insured institution’s primary federal regulator may require the institution to submit a plan for achieving and maintainingcompliance. If an FDIC-insured institution fails to submit an acceptable compliance plan, or fails in any material respect toimplement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an orderdirecting the institution to cure the deficiency. Until the deficiency cited in the regulator’s order is cured, the regulatormay restrict the FDIC-insured institution’s rate of growth, require the FDIC-insured institution to increase its capital,restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriateunder the circumstances. Operating in an unsafe or unsound manner will also constitute grounds for other enforcement action bythe federal bank regulatory agencies, including cease and desist orders and civil money penalty assessments.

Duringthe past decade, the bank regulatory agencies have increasingly emphasized the importance of sound risk management processes andstrong internal controls when evaluating the activities of the FDIC-insured institutions they supervise. Properly managing riskshas been identified as critical to the conduct of safe and sound banking activities and has become even more important as newtechnologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets.The agencies have identified a spectrum of risks facing a banking institution including, but not limited to, credit, market, liquidity,operational, legal and reputational risk. The OCC, in its 2021 supervisory plan, identified key risk themes for 2021 as: creditrisk management given projected weaker economic conditions and commercial and residential real estate concentration risk management.The agency will also be monitoring banks for their transition away from LIBOR (London Interbank Offered Rate) as a reference rate,compliance risk management related to COVID-19 pandemic-related activities, Bank Secrecy Act/anti-money laundering compliance,cybersecurity, planning for and implementation of the current expected credit losses (“CECL”) accounting standard,and CRA performance. The Bank is expected to have active board and senior management oversight; adequate policies, proceduresand limits; adequate risk measurement, monitoring and management information systems; and comprehensive internal controls.

Privacyand Cybersecurity . The Bank is subject to many U.S. federal and state laws and regulations governing requirements for maintainingpolicies and procedures to protect non-public confidential information of their customers. These laws require the Bank to periodicallydisclose its privacy policies and practices relating to sharing such information and permit consumers to opt out of their abilityto share information with unaffiliated third parties under certain circumstances. They also impact the Bank’s ability toshare certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customerswith marketing offers. In addition, as a part of its operational risk mitigation, the Bank is required to implement a comprehensiveinformation security program that includes administrative, technical, and physical safeguards to ensure the security and confidentialityof customer records and information and to require the same of its service providers. These security and privacy policies andprocedures are in effect across all business lines and geographic locations.

BranchingAuthority . National banks headquartered in Kansas, such as the Bank, have the same branching rights in Kansas as banks charteredunder Kansas law, subject to OCC approval. Kansas law grants Kansas-chartered banks the authority to establish branches anywherein the State of Kansas, subject to receipt of all required regulatory approvals. The Dodd-Frank Act permits well-capitalized andwell-managed banks to establish new branches across state lines without legal impediments. However, while federal law permitsstate and national banks to merge with banks in other states, such mergers are subject to: (i) regulatory approval; (ii) federaland state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence fora minimum period of time (not to exceed five years) prior to the merger.

FinancialSubsidiaries. Under federal law and OCC regulations, national banks are authorized to engage, through “financial subsidiaries,”in any activity that is permissible for a financial holding company and any activity that the Secretary of the Treasury, in consultationwith the Federal Reserve, determines is financial in nature or incidental to any such financial activity, except (i) insuranceunderwriting, (ii) real estate development or real estate investment activities (unless otherwise permitted by law), (iii) insurancecompany portfolio investments and (iv) merchant banking. The authority of a national bank to invest in a financial subsidiaryis subject to a number of conditions, including, among other things, requirements that the bank must be well-managed and well-capitalized(after deducting from capital the bank’s outstanding investments in financial subsidiaries). The Bank has not applied forapproval to establish any financial subsidiaries.

TransactionAccount Reserves. Federal law requires FDIC-insured institutions to maintain reserves against their transaction accounts (primarilyNOW and regular checking accounts) to provide liquidity. Reserves are maintained on deposit at the Federal Reserve Banks. Thereserve requirements are subject to annual adjustment by the Federal Reserve, and, for 2020, the Federal Reserve had determinedthat the first $16.9 million of otherwise reservable balances had a zero percent reserve requirement; for transaction accountsaggregating between $16.9 million to $127.5 million, the reserve requirement was 3% of those transaction account balances; andfor net transaction accounts in excess of $127.5 million, the reserve requirement was 10% of the aggregate amount of total transactionaccount balances in excess of $127.5 million. However, in March 2020, in an unprecedented move, the Federal Reserve announcedthat the banking system had ample reserves, and, as reserve requirements no longer played a significant role in this regime, itreduced all reserve tranches to zero percent, thereby freeing banks from the reserve maintenance requirement. The action permitsthe Bank to loan or invest funds that were previously unavailable. The Federal Reserve has indicated that it expects to continueto operate in an ample reserves regime for the foreseeable future.

CommunityReinvestment Act Requirements. The CRA requires the Bank to have a continuing and affirmative obligation in a safe and soundmanner to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. Federal regulatorsregularly assess the Bank’s record of meeting the credit needs of its communities. Applications for additional acquisitionswould be affected by the evaluation of the Bank’s effectiveness in meeting its CRA requirements. In a joint statement respondingto the COVID-19 pandemic, the bank regulatory agencies announced favorable CRA consideration for banks providing retail bankingservices and lending activities in their assessment areas, consistent with safe and sound banking practices, that are responsiveto the needs of low- and moderate-income individuals, small businesses, and small farms affected by the pandemic. Those activitiesinclude waiving certain fees, easing restrictions on out-of-state and non-customer checks, expanding credit products, increasingcredit limits for creditworthy borrowers, providing alternative service options, and offering prudent payment accommodations.The joint statement also provided favorable CRA consideration for certain pandemic-related community development activities.

Anti-MoneyLaundering. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct TerrorismAct of 2001 (the “USA PATRIOT Act”) is designed to deny terrorists and criminals the ability to obtain access to theU.S. financial system and has significant implications for FDIC-insured institutions, brokers, dealers and other businesses involvedin the transfer of money. The USA PATRIOT Act, along with other legal authority, mandates financial services companies to havepolicies and procedures with respect to measures designed to address any or all of the following matters: (i) customer identificationprograms; (ii) money laundering; (iii) terrorist financing; (iv) identifying and reporting suspicious activities and currencytransactions; (v) currency crimes; and (vi) cooperation between FDIC-insured institutions and law enforcement authorities.

Concentrationsin Commercial Real Estate. Concentration risk exists when FDIC-insured institutions deploy too many assets to any one industryor segment. A concentration in commercial real estate is one example of regulatory concern. The interagency Concentrations inCommercial Real Estate Lending, Sound Risk Management Practices guidance (“CRE Guidance”) provides supervisory criteria,including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercialreal estate loan concentrations that may warrant greater supervisory scrutiny: (i) commercial real estate loans exceeding 300%of capital and increasing 50% or more in the preceding three years; or (ii) construction and land development loans exceeding100% of capital. The CRE Guidance does not limit banks’ levels of commercial real estate lending activities, but ratherguides institutions in developing risk management practices and levels of capital that are commensurate with the level and natureof their commercial real estate concentrations. On December 18, 2015, the federal banking agencies issued a statement to reinforceprudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets,increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards. The federalbank agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practicesto identify, measure, monitor, and manage the risks arising from CRE lending. In addition, FDIC-insured institutions must maintaincapital commensurate with the level and nature of their CRE concentration risk.

Basedon the Bank’s loan portfolio as of December 31, 2020, we do not exceed the 300% guideline for commercial real estate loans.

ConsumerFinancial Services. The historical structure of federal consumer protection regulation applicable to all providers of consumerfinancial products and services changed significantly on July 21, 2011, when the CFPB commenced operations to supervise and enforceconsumer protection laws. The CFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to allproviders of consumer products and services, including the Bank, as well as the authority to prohibit “unfair, deceptiveor abusive” acts and practices. The CFPB has examination and enforcement authority over providers with more than $10 billionin assets. FDIC-insured institutions with $10 billion or less in assets, like the Bank, continue to be examined by their applicablebank regulators.

Becauseabuses in connection with residential mortgages were a significant factor contributing to the financial crisis, many new rulesissued by the CFPB and required by the Dodd-Frank Act addressed mortgage and mortgage-related products, their underwriting, origination,servicing and sales. The Dodd-Frank Act significantly expanded underwriting requirements applicable to loans secured by 1-4 familyresidential real property and augmented federal law combating predatory lending practices. In addition to numerous disclosurerequirements, the Dodd-Frank Act imposed new standards for mortgage loan originations on all lenders, including banks and savingsassociations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishinga presumption of compliance for certain “qualified mortgages”. The Regulatory Relief Act provided relief inconnection with mortgages for banks with assets of less than $10 billion, and, as a result, mortgages the Bank makes are now consideredto be qualified mortgages if they are held in portfolio for the life of the loan. The CFPB has from time to time released additionalrules as to qualified mortgages and the borrower’s ability to repay, most recently in October of 2020. The CFPB’srules have not had a significant impact on the Bank’s operations, except for higher compliance costs.

CompanyWeb site

TheCompany maintains a corporate website at www.landmarkbancorpinc.com . In addition, the Company has an investor relationslink at the Bank’s corporate website at www.banklandmark.com. Many of the Company’s policies, including itscode of business conduct and ethics, committee charters and other investor information, are available on its website. The Companymakes available free of charge on or through its website its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, proxystatements, and annual reports as soon as reasonably practicable after the Company electronically files such material with, orfurnishes it to, the SEC. Copies of the Company’s filings with the SEC are also available from the SEC’s website ( http://www.sec.gov )free of charge. The Company will also provide copies of its filings free of charge upon written request to our Corporate Secretaryat Landmark Bancorp, Inc., 701 Poyntz Avenue, Manhattan, Kansas 66502.

StatisticalData

TheCompany has a fiscal year ending on December 31. Unless otherwise noted, the information presented in this Annual Report on Form10-K presents information on behalf of the Company as of and for the year ended December 31, 2020.

Thestatistical data required by Guide 3 of the Securities Act of 1933 Industry Guides is set forth in the following pages. This datashould be read in conjunction with the consolidated financial statements, related notes and “Management’s Discussionand Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K.

I.Distribution of Assets, Liabilities, and Stockholders’ Equity; Interest Rates and Interest Differential

Thefollowing table describes the extent to which changes in tax equivalent interest income and interest expense for major componentsof interest-earning assets and interest-bearing liabilities affected the Company’s interest income and expense during theperiods indicated. The table distinguishes between (i) changes attributable to rate (changes in rate multiplied by prior volume),(ii) changes attributable to volume (changes in volume multiplied by prior rate), and (iii) net change (the sum of the previouscolumns). The net changes attributable to the combined effect of volume and rate which cannot be segregated have been allocatedproportionately to the change due to volume and the change due to rate.

		Years ended December 31,
		2020 vs 2019												2019 vs 2018
		Increase/(decrease) attributable to												Increase/(decrease) attributable to
		Volume				Rate				Net				Volume				Rate				Net
		(Dollars in thousands)
Interest income:
Interest-bearing deposits at banks		$	(2	)		$	-			$	(2	)		$	2			$	6			$	8
Investment securities
Taxable			(1,148	)			(468	)			(1,616	)			105				384				489
Tax-exempt (1)			(384	)			(44	)			(428	)			(482	)			70				(412	)
Loans (2)			6,652				(2,527	)			4,125				2,897				849				3,746
Total			5,118				(3,039	)			2,079				2,522				1,309				3,831
Interest expense:
Deposits			226				(3,462	)			(3,236	)			231				2,054				2,285
Borrowings			(293	)			(459	)			(752	)			(868	)			(25	)			(893	)
Total			(67	)			(3,921	)			(3,988	)			(637	)			2,029				1,392
Net interest income		$	5,185			$	882			$	6,067			$	3,159			$	(720	)		$	2,439

(1)	The change in tax-exempt income on investment securities is presented on a fully taxable equivalent basis, using a 21% federal tax rate.
(2)	The change in tax-exempt loan income is presented on a fully taxable equivalent basis, using a 21% federal tax rate.

Thefollowing table sets forth information relating to average balances of interest-earning assets and interest-bearing liabilitiesfor the years ended December 31, 2020, 2019 and 2018. Average balances are derived from daily average balances. Non-accrual loanswere included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. Theyields set forth in the table below include the effect of deferred fees, discounts and premiums that are amortized or accretedto interest income or interest expense. This table reflects the average yields on assets and average costs of liabilities forthe periods indicated (derived by dividing income or expense by the monthly average balance of assets or liabilities, respectively)as well as the “net interest margin” (which reflects the effect of the net earnings balance) for the periods shown.

		Year ended December 31, 2020												Year ended December 31, 2019												Year ended December 31, 2018
		Average balance				Income/ expense				Yield/ cost				Average balance				Income/ expense				Yield/ cost				Average balance				Income/ expense				Yield/ cost
(Dollars in thousands)
Assets
Interest-earning assets:
Interest bearing deposits at banks		$	16,594			$	27				0.16	%		$	789			$	29				3.68	%		$	737			$	21				2.85	%
Investment securities
Taxable			178,387				4,150				2.33	%			226,193				5,767				2.55	%			221,835				5,278				2.38	%
Tax-exempt (1)			142,315				4,132				2.90	%			155,567				4,559				2.93	%			171,977				4,971				2.89	%
Loans receivable, net (2)			668,326				31,821				4.76	%			517,950				27,696				5.35	%			462,939				23,950				5.17	%
Total interest-earning assets			1,005,622				40,130				3.99	%			900,499				38,051				4.23	%			857,488				34,220				3.99	%
Non-interest-earning assets			95,800												93,258												95,430
Total		$	1,101,422											$	993,757											$	952,918
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market and checking		$	425,525			$	899				0.21	%		$	371,739			$	2,555				0.69	%		$	371,138			$	1,833				0.49	%
Savings accounts			114,280				40				0.04	%			97,966				35				0.04	%			95,532				28				0.03	%
Time deposit			133,412				1,166				0.87	%			177,091				2,751				1.55	%			137,400				1,195				0.87	%
Total deposits			673,217				2,105				0.31	%			646,796				5,341				0.83	%			604,070				3,056				0.51	%
FHLB advances and other borrowings			38,816				664				1.71	%			51,283				1,416				2.76	%			82,743				2,309				2.79	%
Total interest-bearing liabilities			712,033				2,769				0.39	%			698,079				6,757				0.97	%			686,813				5,365				0.78	%
Non-interest-bearing liabilities			272,642												194,935												179,896
Stockholders’ equity			116,747												100,743												86,209
Total		$	1,101,422											$	993,757											$	952,918
Interest rate spread (3)											3.60	%											3.26	%											3.21	%
Net interest margin (4)						$	37,361				3.72	%						$	31,294				3.48	%						$	28,855				3.37	%
Tax equivalent interest - imputed (1) (2)							877												940												1,067
Net interest income						$	36,484											$	30,354											$	27,788
Ratio of average interest-earning assets to average interest-bearing liabilities							141.2	%											129.0	%											124.9	%

	(1)	Income on tax-exempt investment securities is presented on a fully taxable equivalent basis, using a 21% federal tax rate.
	(2)	Income on tax-exempt loans is presented on a fully taxable equivalent basis, using a 21% federal tax rate.
	(3)	Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
	(4)	Net interest margin represents net interest income divided by average interest-earning assets.

II.Investment Portfolio

InvestmentSecurities . The following table sets forth the carrying value of the Company’s investment securities at thedates indicated. None of the investment securities issued by an individual issuer held as of December 31, 2020 were in excessof 10% of the Company’s stockholders’ equity, excluding U.S. federal agency obligations. The Company’s federalagency obligations consist of obligations of U.S. government-sponsored enterprises, primarily the FHLB. The Company’s agencymortgage-backed securities portfolio consists of securities predominantly underwritten to the standards of and guaranteed by thegovernment-sponsored agencies of Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and GovernmentNational Mortgage Association. The Company’s investments in certificates of deposit consist of FDIC-insured certificatesof deposit with other financial institutions.

		As of December 31,
		2020				2019				2018
		(Dollars in thousands)
Investment securities:
U.S. treasury securities		$	2,037			$	2,316			$	1,971
U.S. federal agency obligations			18,924				4,106				10,361
Municipal obligations, tax-exempt			142,676				145,862				159,112
Municipal obligations, taxable			49,535				46,779				53,035
Agency mortgage-backed securities			78,638				162,031				156,076
Certificates of deposit			5,460				1,904				7,790
Total investment securities available-for-sale, at fair value		$	297,270			$	362,998			$	388,345
FHLB stock			2,434				1,079				2,752
Federal Reserve Bank stock			1,928				1,919				1,913
Correspondent bank common stock			111				111				111
Bank stocks, at cost		$	4,473			$	3,109			$	4,776

Thefollowing table sets forth certain information regarding the carrying values, weighted average yields, and maturities of the Company’sinvestment securities portfolio, as of December 31, 2020. Yields on tax-exempt obligations have been computed on a tax equivalentbasis, using a 21% federal tax rate for 2020. Mortgage-backed investment securities include scheduled principal payments and estimatedprepayments based on observable market inputs. Actual prepayments will differ from contractual maturities because borrowers havethe right to prepay obligations with or without prepayment penalties.

		As of December 31, 2020
		One year or less								One to five years								Five to ten years								More than ten years								Total
		Carrying				Average				Carrying				Average				Carrying				Average				Carrying				Average				Carrying				Average
		value				yield				value				yield				value				yield				value				yield				value				yield
		(Dollars in thousands)
Investment securities:
U.S. treasury securities		$	2,037				2.01	%		$	-				0.00	%		$	-				0.00	%		$	-				0.00	%			2,037				2.01	%
U.S. federal agency obligations			5,543				0.09	%			13,381				0.62	%			-				0.00	%			-				0.00	%			18,924				0.46	%
Municipal obligations, tax-exempt			1,958				1.79	%			38,181				2.26	%			45,324				2.75	%			57,213				3.58	%			142,676				2.94	%
Municipal obligations, taxable			1,566				2.75	%			18,946				2.73	%			20,459				2.98	%			8,564				3.10	%			49,535				2.90	%
Agency mortgage-backed securities			751				2.31	%			77,887				2.21	%			-				0.00	%			-				0.00	%			78,638				2.21	%
Certificates of deposit			703				2.44	%			4,757				0.45	%			-				0.00	%			-				0.00	%			5,460				0.71	%
Total		$	12,558				1.26	%		$	153,152				2.09	%		$	65,783				2.82	%		$	65,777				3.52	%		$	297,270				2.54	%

III.Loan Portfolio

LoanPortfolio Composition . The following table sets forth the composition of the loan portfolio by type of loan atthe dates indicated.

		As of December 31,
		2020				2019				2018				2017				2016
Balance		(Dollars in thousands)
One-to-four family residential real estate loans		$	157,984			$	146,505			$	136,895			$	136,215			$	136,846
Construction and land loans			26,106				22,459				20,083				19,356				13,738
Commercial real estate loans			172,307				133,501				138,967				120,624				118,200
Commercial loans			134,047				109,612				74,289				54,591				54,506
Paycheck protection program loans			100,084				-				-				-				-
Agriculture loans			96,532				98,558				96,632				83,008				78,324
Municipal loans			2,332				2,656				2,953				3,396				3,884
Consumer loans			24,122				25,101				25,428				22,046				20,271
Total gross loans			713,514				538,392				495,247				439,236				425,769
Net deferred loan costs and loans in process			(1,957	)			255				(109	)			(34	)			36
Allowance for loan losses			(8,775	)			(6,467	)			(5,765	)			(5,459	)			(5,344	)
Loans, net		$	702,782			$	532,180			$	489,373			$	433,743			$	420,461
Percent of total
One-to-four family residential real estate loans			22.1	%			27.2	%			27.6	%			31.0	%			32.1	%
Construction and land loans			3.7	%			4.2	%			4.1	%			4.4	%			3.2	%
Commercial real estate loans			24.2	%			24.8	%			28.1	%			27.5	%			27.8	%
Commercial loans			18.8	%			20.3	%			15.0	%			12.4	%			12.8	%
Paycheck protection program loans			14.0	%			0.0	%			0.0	%			0.0	%			0.0	%
Agriculture loans			13.5	%			18.3	%			19.5	%			18.9	%			18.4	%
Municipal loans			0.3	%			0.5	%			0.6	%			0.8	%			0.9	%
Consumer loans			3.4	%			4.7	%			5.1	%			5.0	%			4.8	%
Total gross loans			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

Thefollowing table sets forth the contractual maturities of loans as of December 31, 2020. The table does not include unscheduledprepayments.

		As of December 31, 2020
		1 year or less				1-5 years				After 5 years				Total
		(Dollars in thousands)
One-to-four family residential real estate loans		$	20,938			$	60,246			$	76,800			$	157,984
Construction and land loans			14,070				7,339				4,697				26,106
Commercial real estate loans			33,755				63,506				75,046				172,307
Commercial loans			72,229				44,382				17,436				134,047
Paycheck protection program loans			-				100,084				-				100,084
Agriculture loans			45,787				21,046				29,699				96,532
Municipal loans			248				658				1,426				2,332
Consumer loans			3,129				7,992				13,001				24,122
Total gross loans		$	190,156			$	305,253			$	218,105			$	713,514

Thefollowing table sets forth the dollar amount of all loans that mature after one year and whether such loans had fixed interestrates or adjustable interest rates:

		As of December 31, 2020
		Fixed				Adjustable				Total
		(Dollars in thousands)
One-to-four family residential real estate loans		$	64,121			$	72,925			$	137,046
Construction and land loans			480				11,556				12,036
Commercial real estate loans			28,056				110,496				138,552
Commercial loans			23,587				38,231				61,818
Paycheck protection program loans			100,050				-				100,050
Agriculture loans			10,701				40,044				50,745
Municipal loans			2,084				-				2,084
Consumer loans			2,549				18,444				20,993
Total gross loans		$	231,628			$	291,696			$	523,324

Non-performingAssets . The following table sets forth information with respect to non-performing assets, including non-accrualloans and real estate acquired through foreclosure or by deed in lieu of foreclosure (“real estate owned”). The accrualof interest on non-performing loans is discontinued at the time the loan is ninety days delinquent, unless the credit is wellsecured and in process of collection. Loans are placed on non-accrual or are charged off at an earlier date if collection of principalor interest is considered doubtful. Under the original terms of the Company’s non-accrual loans as of December 31, 2020,interest earned on such loans for the years ended December 31, 2020, 2019 and 2018 would have increased interest income by $380,000,$230,000 and $254,000, respectively, if included in the Company’s interest income for those years. No interest income relatedto non-accrual loans was included in interest income for the years ended December 31, 2020, 2019 and 2018.

		As of December 31,
		2020				2019				2018				2017				2016
		(Dollars in thousands)
Non-accrual loans		$	10,515			$	5,546			$	5,236			$	6,041			$	2,746
Accruing loans over 90 days past due			-				-				-				-				-
Non-performing investments			-				-				-				-				-
Real estate owned, net			1,774				290				35				436				1,279
Non-performing assets		$	12,289			$	5,836			$	5,271			$	6,477			$	4,025
Performing TDRs		$	1,947			$	3,134			$	3,455			$	3,719			$	3,983
Non-performing loans to total gross loans			1.47	%			1.03	%			1.06	%			1.38	%			0.64	%
Non-performing assets to total assets			1.03	%			0.58	%			0.53	%			0.70	%			0.44	%
Allowance for loan losses to non-performing loans			83.45	%			116.61	%			110.10	%			90.37	%			194.61	%

Theincrease in non-performing loans primarily was related to two commercial real estate loan relationships totaling $5.5 million.The increase in non-accrual loans as of December 31, 2019 compared to December 31, 2018 was driven by higher levels of non-performingone-to-four family residential real estate loans, primarily related to one loan relationship, and increased levels of non-performingagriculture loans. Partially offsetting those increases was a decrease in non-performing loans related to the liquidation of collateralsecuring a $3.6 million loan relationship. The liquidation resulted in a charge-off of $259,000 during 2019. The decrease in non-accrualloans as of December 31, 2018 compared to December 31, 2017 was primarily related to a charge-off of $853,000 associatedwith a $3.6 million loan relationship consisting of $1.8 million in commercial loans and a $1.8 million commercial real estateloan. This loan relationship was primarily responsible for the increase in non-accrual loans as of December 31, 2017 comparedto December 31, 2016.

AtDecember 31, 2020, the $1.8 million of real estate owned primarily consisted of a five residential real estate properties, twocommercial properties and one parcel of land. The increase in real estate owned as of December 31, 2020 compared to December 31,2019 was primarily due to obtaining the collateral securing non-performing commercial real estate and one-to-four family residentialreal estate loans. The increase in real estate owned as of December 31, 2019 compared to December 31, 2018 was principally associatedwith obtaining the collateral securing a non-performing loan relationship consisting of commercial real estate and commercialloans. The decrease in real estate owned as of December 31, 2018 compared to December 31, 2017 was primarily associated with thesales of several residential real estate properties and one commercial real estate property. The decrease in real estate ownedas of December 31, 2017 compared to December 31, 2016 was principally associated with the sale of residential real estate properties.

Aspart of the Company’s credit risk management, the Company continues to aggressively manage the loan portfolio to identifyproblem loans and has placed additional emphasis on its commercial real estate relationships. As discussed in more detail in the“Asset Quality and Distribution” section of “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” as of December 31, 2020, the Company concluded its allowance for loan losses was adequatebased on the evaluation of the loan portfolio’s probable incurred losses.

IV.Summary of Loan Loss Experience

Thefollowing table sets forth information with respect to the Company’s allowance for loan losses at the dates and for theperiods indicated:

		As of and for the years ended December 31,
		2020				2019				2018				2017				2016
		(Dollars in thousands)
Balances at beginning of year		$	6,467			$	5,765			$	5,459			$	5,344			$	5,922
Provision for loan losses			3,300				1,400				1,400				450				500
Charge-offs:
One-to-four family residential real estate loans			(251	)			(56	)			(32	)			(37	)			(14	)
Construction and land loans			(191	)			(31	)			-				-				-
Commercial real estate loans			(131	)			-				-				(71	)			-
Commercial loans			(292	)			(453	)			(950	)			-				(306	)
Paycheck protection program loans			-				-				-				-				-
Agriculture loans			(3	)			-				-				(45	)			(375	)
Municipal loans			-				-				-				-				-
Consumer loans			(248	)			(285	)			(178	)			(335	)			(471	)
Total charge-offs			(1,116	)			(825	)			(1,160	)			(488	)			(1,166	)
Recoveries:
One-to-four family residential real estate loans			-				1				4				11				9
Construction and land loans			-				-				-				-				-
Commercial real estate loans			13				-				1				-				-
Commercial loans			3				53				22				20				34
Paycheck protection program loans			-				-				-				-				-
Agriculture loans			-				-				1				1				-
Municipal loans			6				6				2				37				6
Consumer loans			102				67				36				84				39
Total recoveries			124				127				66				153				88
Net charge-offs			(992	)			(698	)			(1,094	)			(335	)			(1,078	)
Balances at end of year		$	8,775			$	6,467			$	5,765			$	5,459			$	5,344

TheCompany recorded net loan charge-offs of $992,000 during 2020 compared to $698,000 during 2019. The net loan charge-offswere primarily related to a commercial loan relationship, one-to-four family residential real estate loan relationship and a commercialreal estate loan relationship which included construction and land loans. The Company recorded net loan charge-offs of $698,000during 2019 compared to $1.1 million during 2018. The net loan charge-offs in 2019 were primarily related to two commercialloan relationships. The Company recorded net loan charge-offs of $1.1 million during 2018 compared to $335,000 during 2017. Thenet loan charge-offs in 2018 were primarily related to one commercial loan relationship. The Company recorded net loancharge-offs of $335,000 during 2017 compared to $1.1 million during 2016. There were no significant loan charge-offs recordedduring 2017. The Company recorded net loan charge-offs of $1.1 million during 2016, which were primarily related to an agricultureloan relationship which was subject to trouble debt restructuring (“TDR”) and the liquidation of the assets securingan impaired commercial loan relationship.

Thedistribution of the Company’s allowance for losses on loans at the dates indicated and the percent of loans in each categoryto total loans is summarized in the following table. This allocation reflects management’s judgment as to risks inherentin the types of loans indicated, but in general the Company’s total allowance for loan losses included in the table is notrestricted and is available to absorb all loan losses. The amount allocated in the following table to any category should notbe interpreted as an indication of expected actual charge-offs in that category.

		As of December 31,
		2020								2019								2018								2017								2016
		Amount				% Loan type to total loans				Amount				% Loan type to total loans				Amount				% Loan type to total loans				Amount				% Loan type to total loans				Amount				% Loan type to total loans
		(Dollars in thousands)
One-to-four family residential real estate loans		$	859				22.1	%		$	501				27.2	%		$	449				27.6	%		$	542				31.0	%		$	504				32.1	%
Construction and land loans			181				3.7	%			271				4.2	%			168				4.1	%			181				4.4	%			53				3.2	%
Commercial real estate loans			2,482				24.2	%			1,386				24.8	%			1,686				28.1	%			1,540				27.5	%			1,777				27.8	%
Commercial loans			2,388				18.8	%			1,815				20.3	%			1,051				15.0	%			1,226				12.4	%			1,119				12.8	%
Paycheck protection program loans			-				14.0	%			-				0.0	%			-				0.0	%			-				0.0	%			-				0.0	%
Agriculture loans			2,690				13.5	%			2,347				18.3	%			2,238				19.5	%			1,812				18.9	%			1,684				18.4	%
Municipal loans			6				0.3	%			7				0.5	%			7				0.6	%			8				0.8	%			12				0.9	%
Consumer loans			169				3.4	%			140				4.7	%			166				5.1	%			150				5.0	%			195				4.8	%
Total		$	8,775				100.0	%		$	6,467				100.0	%		$	5,765				100.0	%		$	5,459				100.0	%		$	5,344				100.0	%

Theincrease in the allocation of the allowance for loan losses on our one-to-four family residential real estate loans as of December31, 2020 compared to December 31, 2019 was primarily related to increased risk factors associated with probable and incurred lossesdue COVID-19. The increase in the allocation of the allowance for loan losses on our one-to-four family residential real estateloans as of December 31, 2019 compared to December 31, 2018 was primarily related to growth in our loan balances and an increasein specific allowances related to impaired loans. The decrease in the allocation of the allowance for loan losses on our one-to-fourfamily residential real estate loans as of December 31, 2018 compared to December 31, 2017 was primarily related to improvementsin the housing market which contributed to lower qualitative adjustments in our analysis and a decrease in specific allowancesrelated to impaired loans. The increase in the allocation of the allowance for loan losses on our one-to-four family residentialreal estate loans as of December 31, 2017 compared to December 31, 2016 was primarily related to the increase in specific allowancesrelated to impaired loans.

Thedecrease in the allocation of the allowance for loan losses on construction and land loans as of December 31, 2020 compared toDecember 31, 2019 was primarily related to related to a decrease in specific allowances related to impaired loans. The increasein the allocation of the allowance for loan losses on construction and land loans as of December 31, 2019 compared to December31, 2018 was primarily related to an increase in specific allowances related to impaired loans. The decrease in the allocationof the allowance for loan losses on construction and land loans as of December 31, 2018 compared to December 31, 2017 was primarilyrelated to improvements in these markets which contributed to lower qualitative adjustments in our analysis. The allocation ofthe allowance for loan losses on construction and land increased as of December 31, 2017 compared to December 31, 2016 due tohigher outstanding loan balances.

Theincrease in the allocation of the allowance for loan losses on commercial real estate loans as of December 31, 2020 compared toDecember 31, 2019 was primarily related to higher loan balances and increased risk factors associated with probable and incurredlosses due COVID-19. The decrease in the allocation of the allowance for loan losses on commercial real estate loans as of December31, 2019 compared to December 31, 2018 was primarily related to lower loan balances, and improvements in the commercial real estatemarkets which resulted in lower qualitative adjustments in our analysis. The allocation of the allowance for loan losses on commercialreal estate loans increased as of December 31, 2018 compared to December 31, 2017 due to an increase in classified loans and anincrease in specific allowances related to impaired loans. The allocation of the allowance for loan losses on commercial realestate loans decreased as of December 31, 2017 compared to December 31, 2016 due to continued improvements in the commercial realestate market which contributed to lower qualitative adjustments in our analysis.

Theincrease in the allocation of the allowance for loan losses on our commercial loans as of December 31, 2020 compared to December31, 2019 was primarily related to higher loan balances and increased risk factors associated with probable and incurred lossesdue COVID-19. The increase in the allocation of the allowance for loan losses on our commercial loans as of December 31, 2019compared to December 31, 2018 was primarily related to increased loan balances, higher specific allowances related to impairedloans and increasing risk in the portfolio which resulted in higher qualitative adjustments in our analysis. The decrease in theallocation of the allowance for loan losses on our commercial loans as of December 31, 2018 compared to December 31, 2017 wasprimarily related to a decline in specific allowances related to impaired loans as a result of charge-offs recorded during 2018.The increase in the allocation of the allowance for loan losses on our commercial loans as of December 31, 2017 compared to December31, 2016 was primarily related to the increase in specific allowances related to impaired loans.

Wedo not record an allowance for loan losses on PPP loans because these loans are fully guaranteed by the SBA.

Theincrease in the allocation of the allowance for loan losses on agriculture loans as of December 31, 2020 compared to December31, 2019 was primarily related to increased risk factors associated with probable and incurred losses due COVID-19. The increasein the allocation of the allowance for loan losses on agriculture loans as of December 31, 2019 compared to December 31, 2018was primarily related to higher specific allowances related to impaired loans and higher loan balances. The increase in the allocationof the allowance for loan losses on agriculture loans as of December 31, 2018 compared to December 31, 2017 was primarily relatedto growth in loan balances and higher levels of classified loans. The increase in the allocation of the allowance for loan losseson agriculture loans as of December 31, 2017 compared to December 31, 2016 was primarily due to higher loan balances and management’sjudgment to increase the risk factors.

Theallowance for loan losses is discussed in more detail in the “Asset Quality and Distribution” section of “Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of December 31, 2020,we believed the Company’s allowance for loan losses continued to be adequate based on the Company’s evaluation ofthe loan portfolio’s probable incurred losses.

V.Deposits

Thefollowing table presents the average deposit balances and the average rate paid on those balances for the years indicated.

(Dollars in thousands)		Years ended December 31,
		2020								2019								2018
		Average Balance				Average Rate				Average Balance				Average Rate				Average Balance				Average Rate
Non-interest bearing demand		$	253,840				-			$	181,573				-			$	168,855				-
Money market and checking			425,525				0.21	%			371,739				0.69	%			371,138				0.49	%
Savings accounts			114,280				0.04	%			97,966				0.04	%			95,532				0.03	%
Time			133,412				0.87	%			177,091				1.55	%			137,400				0.87	%
Total		$	927,057							$	828,369							$	772,925

Thefollowing table presents the maturities of jumbo time deposits (amounts of $100,000 or more).

(Dollars in thousands)		As of December 31,
		2020				2019
Three months or less		$	38,512			$	45,883
Over three months through six months			15,755				19,427
Over six months through 12 months			16,493				13,146
Over 12 months			6,675				7,702
Total		$	77,435			$	86,158

VI.Return on Equity and Assets

Thefollowing table presents information on return on average equity, return on average assets, equity to total assets and our dividendpayout ratio.

		As of or for the years ended December 31,
		2020				2019				2018
Return on average assets			1.77	%			1.07	%			1.09	%
Return on average equity			16.70	%			10.58	%			12.09	%
Equity to total assets			10.66	%			10.88	%			9.32	%
Dividend payout ratio			18.54	%			32.90	%			31.88	%

VII.Short-term Borrowings

Thefollowing table presents information on certain components of short-term borrowings. Information on short-term borrowings is excludedfor the years ended December 31, 2020 and 2019 as the average balances of each category of short-term borrowings was less than30 percent of stockholders’ equity.

		For the year ended December 31,
		2018
FHLB Line of Credit
Balance at year-end		$	20,000
Maximum month-end balance			80,600
Average balance during year			41,311
Weighted average interest rates:
At year-end			2.65	%
During the year			2.15	%

ITEM1A. RISK FACTORS

Aninvestment in our securities is subject to certain risks inherent in our business. Before making an investment decision, you shouldcarefully consider the risks and uncertainties described below together with all of the other information included in this report.In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that wecurrently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations.The value or market price of our securities could decline due to any of these identified or other risks, and you could lose allor part of your investment.

COVID-19Risks

Theoutbreak of COVID-19 has led to an economic recession and had other adverse effects on the U.S. economy and has disrupted ouroperations. The ongoing COVID-19 pandemic has also adversely impacted certain industries in which our clients operate and impairedtheir ability to fulfill their financial obligations to us. The ultimate impact of the COVID-19 pandemic on our business remainsuncertain but may have a material and adverse effect on our business, financial condition, results of operations and growth prospects.

TheCOVID-19 pandemic continues to negatively impact the United States and the world. The spread of COVID-19 has negatively impactedthe U.S. economy at large, and small businesses in particular, and has affected our operations. The responses on the part of theU.S. and global governments and populations have created a recessionary environment, reduced economic activity and caused significantvolatility in the global stock markets. The ultimate impact of the COVID-19 pandemic on our business remains uncertain but mayhave a material and adverse effect on our business, financial condition, results of operations and growth prospects.

Theoutbreak of COVID-19 has resulted in a decline in the businesses of certain of our clients, a decrease in consumer confidence,an increase in unemployment, and a disruption in the services provided by our vendors. Continued disruptions to our clients’businesses could result in increased risk of delinquencies, defaults, foreclosures, and losses on our loans, negatively impactregional economic conditions, result in declines in local loan demand, liquidity of loan guarantors, the value of loan collateral(particularly in real estate), loan originations, and deposit availability and negatively impact the implementation of our growthstrategy. Although the U.S. government introduced, and may introduce in the future, programs designed to soften the impact ofCOVID-19 on small businesses or provide stimulus checks to individuals, our borrowers may still not be able to satisfy their financialobligations to us.

Inaddition, COVID-19 has impacted and likely will continue to impact the financial ability of businesses and consumers to borrowmoney, which would negatively impact loan volumes. Certain of our borrowers are in, or have exposure to, the retail, restaurant,hospitality and agriculture industries and are located in areas that are, or were, quarantined or under stay-at-home orders. COVID-19may also have an adverse effect on our commercial real estate portfolio, particularly with respect to real estate with exposureto these industries, our one-to-four family residential real estate loan business and loan portfolio, and the value of certaincollateral securing our loans. As COVID-19 cases have begun to surge in recent months, any new or prolonged quarantine or stay-at-homeorders would have a negative adverse impact on these borrowers and their revenue streams, which consequently impacts their abilityto meet their financial obligations to us and could result in loan defaults.

Theultimate extent of the COVID-19 pandemic’s effect on our business will depend on many factors, primarily including the speedand extent of any recovery from the related economic recession. Among other things, this will depend on the duration of the COVID-19pandemic, particularly in our Kansas market, the development, distribution and supply of vaccines, therapies and other publichealth initiatives to control the spread of the disease, the nature and size of federal economic stimulus and other governmentalefforts, and the possibility of additional state lockdown or stay-at-home orders in our markets in response to the recent surgein the number of COVID-19 cases.

Theinitial distribution of vaccines has been slow, and there may continue to be challenges with producing and distributing sufficientquantities of the vaccines. If the general public is unwilling or unable to access effective vaccines and therapies, this mayalso prolong the COVID-19 pandemic. In addition, new variants of COVID-19 may increase the spread or severity of COVID-19 andpreviously developed vaccines and therapies may not be as effective against new COVID-19 variants.

Asa result of the COVID-19 pandemic, we may experience adverse financial consequences due to a number of other factors, includingbut not limited to:

	●	a sustained decline in our stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause management to perform impairment testing on our goodwill and other intangible assets that could result in an impairment charge being recorded for that period, and adversely impact our results of operations and the ability of the Bank to pay dividends to us;
	●	increased demand on our liquidity as we meet borrowers’ needs, experience significant credit deterioration, and cover expenses related to our business continuity plan;
	●	the potential for reduced liquidity and its negative affect on our capital and leverage ratios;
	●	the negative effect on earnings resulting from the Bank modifying loans and agreeing to loan payment deferrals due to the COVID-19 pandemic;
	●	the modification of our business practices, including with respect to branch operations, employee travel, employee work locations, participation in meetings, events and conferences, and related changes for our vendors and other business partners;
	●	a decline in demand for our products and services;
	●	a potential increase in loan delinquencies, problem assets and foreclosures if the economic downturn or high levels of unemployment continue for an extended period of time;
	●	a potential decline in the net worth and liquidity of loan guarantors;
	●	the yield on our assets declining to a greater extent than the decline in our cost of interest-bearing liabilities as a result of the decline in the Federal Reserve’s target federal funds rate to near 0% (or possibly below 0% in the future);
	●	uncertainties created by the pandemic, combined with the disruptions to our own business, that could negatively affect our ability to execute our acquisition strategy for the foreseeable future, limiting or delaying our future growth plans;
	●	increases in federal and state taxes as a result of the effects of the pandemic and stimulus programs on governmental budgets;
	●	an increase in FDIC premiums if the agency experiences additional resolution costs relating to bank failures;
	●	increased cyber and payment fraud risk due to increased online and remote activity; and
	●	other operational failures due to changes in our normal business practices because of the pandemic and governmental actions to contain it.

Overall,we believe that the economic impact from COVID-19 could have a material and adverse impact on our business and result in significantlosses in our loan portfolio, all of which would adversely and materially impact our earnings and capital. Even after the COVID-19pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of the global economicimpact of the COVID-19 pandemic, including the availability of credit, adverse impacts on liquidity and any recession that hasoccurred or may occur in the future. There are no comparable recent events that provide guidance as to the effect the spread ofCOVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the pandemic is highly uncertain and subjectto change.

TheU.S. government and banking regulators, including the Federal Reserve, have taken a number of unprecedented actions in responseto the COVID-19 pandemic, which could ultimately have a material adverse effect on our business and results of operations.

OnMarch 27, 2020, President Trump signed into law the CARES Act, which established a $2.0 trillion economic stimulus package, includingcash payments to individuals, supplemental unemployment insurance benefits and a $349.0 billion loan program administered throughthe SBA referred to as the PPP. In addition, on December 27, 2020, President Trump signed the Consolidated Appropriations Act,2021, a $900.0 billion COVID-19 relief package that included an additional $284.5 billion in PPP funding. On March 11,2021, President Biden signed into law an additional $1.9 trillion federal stimulus bill, which could have a material effect onthe overall economic environment.

TheCOVID-19 pandemic has significantly affected the financial markets and the Federal Reserve has taken a number of actions in response.In March 2020, the Federal Reserve dramatically reduced the target federal funds rate and announced a $700 billion quantitativeeasing program in response to the expected economic downturn caused by the COVID-19 pandemic. In addition, the Federal Reservereduced the interest that it pays on excess reserves. We expect that these reductions in interest rates, especially if prolonged,could adversely affect our net interest income, our net interest margin and our profitability. The Federal Reserve also launchedthe Main Street Lending Program, which offered deferred interest on four-year loans to small and mid-sized businesses. The MainStreet Lending Program terminated on January 8, 2021. The impact of the COVID-19 pandemic on our business activities as a resultof new government and regulatory laws, policies, programs, and guidelines, as well as market reactions to such activities, remainsuncertain but may ultimately have a material adverse effect on our business and results of operations.

Asa participating lender in the PPP, we are subject to additional risks of litigation from our clients or other parties regardingour processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guarantees.

Sincethe opening of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that suchbanks used in processing applications for the PPP and claims related to agent fees. If any such litigation is filed against usand is not resolved in a manner favorable to us, it may result in significant financial liability or adversely affect our reputation.In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs, or reputational damagecaused by the PPP related litigation could have a material adverse impact on our business, financial condition, and results ofoperations. Also, it has been reported that many borrowers fraudulently obtained PPP loans through the program. We may be subjectto regulatory and litigation risk if any of our PPP borrowers used fraudulent means to obtain a PPP loan.

Wealso have credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which theloan was originated, funded, or serviced by the Bank, such as an issue with the eligibility of a borrower to receive a PPP loan,which may or may not be related to the ambiguity in the laws, rules, and guidance regarding the operation of the PPP, or if theborrower fraudulently obtained a PPP loan. In the event of a loss resulting from a default on a PPP loan and a determination bythe SBA that there is a deficiency in the manner in which the PPP loan was originated, funded, or serviced by us, the SBA maydeny its liability under the guaranty, reduce the amount of the guaranty, or if it has already paid under the guaranty, seek recoveryof any loss related to the deficiency from us.

CreditRisks

Wemust effectively manage our credit risk.

Thereare risks inherent in making any loan, including risks inherent in dealing with individual borrowers, risks of nonpayment, risksresulting from uncertainties as to the future value of collateral and risks resulting from changes in economic and industry conditions.We attempt to minimize our credit risk through prudent loan application approval procedures, careful monitoring of the concentrationof our loans within specific industries and periodic independent reviews of outstanding loans by our credit review department.However, we cannot assure you that such approval and monitoring procedures will reduce these credit risks.

Mostof our loans are commercial, real estate, or agriculture loans, each of which is subject to distinct types of risk. To reducethe lending risks we face, we generally take a security interest in borrowers’ property for all three types of loans. Inaddition, we sell certain residential real estate loans to third parties. Nevertheless, the risk of non-payment is inherent inall types of loans, and if we are unable to collect amounts owed, it may materially affect our operations and financial performance.For a more complete discussion of our lending activities see Item 1 of this Annual Report on Form 10-K.

Ourbusiness is subject to domestic and, to a lesser extent, international economic conditions and other factors, many of which arebeyond our control and could materially and adversely affect us.

Ourfinancial performance generally, and in particular the ability of customers to pay interest on and repay principal of outstandingloans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer,is highly dependent upon the business environment not only in the markets where we operate, but also in the state of Kansas generallyand in the United States as a whole. A favorable business environment is generally characterized by, among other factors: economicgrowth; efficient capital markets; low inflation; low unemployment; high business and investor confidence; and strong businessearnings. Unfavorable or uncertain economic and market conditions can be caused by: declines in economic growth, business activityor investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increasesin inflation or interest rates; high unemployment; uncertainty in U.S. trade policies, legislation, treaties and tariffs; naturaldisasters; acts of war or terrorism; widespread disease or pandemics; or a combination of these or other factors.

Economicconditions in the state of Kansas are impacted by commodity prices, which may adversely impact the Kansas economy, specificallythe agriculture sector. Declines in commodity prices could materially and adversely affect our results of operations.

Theagricultural economy in the Midwest, including Kansas, has improved recently after experiencing weakness over the previous severalyears. A prolonged period of weakness in the agricultural economy could result in a decrease in demand for loans or other productsand services offered by us, an increase in agricultural loan delinquencies and defaults, an increase in impaired assets and foreclosures,a decline in the value of our loans secured by real estate, and an inability to sell foreclosed assets. The effects of a prolongedperiod of a weakened agricultural economy could have a material adverse effect on our business, financial condition and resultsof operations.

Ourallowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.

Wemaintain our allowance for loan losses at a level considered appropriate by management to absorb probable incurred loan lossesin the portfolio. Additionally, our Board of Directors regularly monitors the appropriateness of our allowance for loan losses.The allowance is also subject to regulatory examinations and a determination by the regulatory agencies as to the appropriatelevel of the allowance. The amount of future loan losses is susceptible to changes in economic, operating and other conditions,including changes in interest rates and the value of the underlying collateral, which may be beyond our control, and such lossesmay exceed current estimates. At December 31, 2020 and 2019 our allowance for loan losses as a percentage of total loans was 1.23%and 1.20%, respectively, and as a percentage of total non-performing loans was 83.45% and 116.61%, respectively. Although managementbelieves that the allowance for loan losses is appropriate to absorb probable incurred losses on any existing loans that may becomeuncollectible, we cannot predict loan losses with certainty nor can we assure you that our allowance for loan losses will provesufficient to cover actual loan losses in the future. Loan losses in excess of our reserves will adversely affect our business,financial condition and results of operations.

Also,beginning in January 2023, the Company will be required to implement the CECL accounting standard, which will change how the Companycalculates its allowance for loan losses by requiring the Company to determine periodic estimates of lifetime expected creditlosses on loans and recognize the expected credit losses as allowances for loan losses. This will change the current method ofproviding allowances for loan losses that are probable, which may require us to increase our allowance for loan losses. Any increasein our allowance for loan losses may have a material adverse effect on our financial condition and results of operations.

Ourconcentration of one-to-four family residential mortgage loans may result in lower yields and profitability.

One-to-fourfamily residential mortgage loans comprised $158.0 million and $146.5 million, or 22.1% and 27.2%, of our loan portfolio at December31, 2020 and 2019, respectively. These loans are secured primarily by properties located in the state of Kansas. Our concentrationof these loans results in lower yields relative to other loan categories within our loan portfolio. While these loans generallypossess higher yields than investment securities, their repayment characteristics are not as well defined, and they generallypossess a higher degree of interest rate risk versus other loans and investment securities within our portfolio. This increasedinterest rate risk is due to the repayment and prepayment options inherent in residential mortgage loans which are exercised byborrowers based upon the overall level of interest rates. These residential mortgage loans are generally made on the basis ofthe borrower’s ability to make repayments from his or her employment and the value of the property securing the loan. Thus,as a result, repayment of these loans is also subject to general economic and employment conditions within the communities andsurrounding areas where the property is located.

Adecline in residential real estate market prices or home sales has the potential to adversely affect our one-to-four family residentialmortgage portfolio in several ways, such as a decrease in collateral values and an increase in non-performing loans, each of whichcould adversely affect our operating results and/or financial condition.

Ourloan portfolio has a large concentration of real estate loans, which involve risks specific to real estate value.

Realestate lending (including commercial real estate, construction and land and residential real estate) is a large portion of ourloan portfolio. These categories were $356.4 million, or approximately 50.0% of our total loan portfolio, as of December 31, 2020,as compared to $302.5 million, or approximately 56.2% of our total loan portfolio, as of December 31, 2019. The market value ofreal estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in whichthe real estate is located. Although a significant portion of commercial real estate and construction and land loans are securedby a secondary form of collateral, adverse developments affecting real estate values in one or more of our markets could increasethe credit risk associated with our loan portfolio. Additionally, real estate lending typically involves higher loan principalamounts, and the repayment of the loans generally is dependent, in large part, on sufficient income from the properties securingthe loans to cover operating expenses and debt service. Economic events or governmental regulations outside of the control ofthe borrower or lender could negatively impact the future cash flow and market values of the affected properties.

Ifthe loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined,then we may not be able to realize the amount of security that we anticipated at the time of originating the loan, which couldcause us to increase our provision for loan losses and adversely affect our operating results and financial condition. In lightof the uncertainty that exists in the economy and credit markets nationally, there can be no guarantee that we will not experienceadditional deterioration in credit performance by our real estate loan customers.

Commercialloans make up a significant portion of our loan portfolio.

Commercialloans comprised $134.0 million and $109.6 million, or 18.8% and 20.3%, of our loan portfolio at December 31, 2020 and 2019, respectively.Our commercial loans are made based primarily on the identified cash flow of the borrower and secondarily on the underlying collateralprovided by the borrower. Most often, this collateral is accounts receivable, inventory, or machinery. Credit support providedby the borrower for most of these loans, and the probability of repayment is based on the liquidation of the pledged collateraland enforcement of a personal guarantee, if any exists. As a result, in the case of loans secured by accounts receivable, theavailability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collectamounts due from its customers. The collateral securing other loans may depreciate over time, may be difficult to appraise andmay fluctuate in value based on the success of the business. Due to the larger average size of each commercial loan as comparedwith other loans such as residential loans, as well as collateral that is generally less readily marketable, losses incurred ona small number of commercial loans could have a material adverse impact on our financial condition and results of operations.

Thesuccess of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as a PreferredLender under the SBA loan programs and our ability to comply with applicable SBA lending requirements.

Asan SBA Preferred Lender, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approvalprocess necessary for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participatinglenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, theSBA may request corrective actions or impose other restrictions, including revocation of the lender’s Preferred Lender status.If we lose our status as a Preferred Lender, we may lose our ability to compete effectively with other SBA Preferred Lenders,and as a result we could experience a material adverse effect to our financial results. Any changes to the SBA program, includingchanges to the level of guaranty provided by the federal government on SBA loans or changes to the level of funds appropriatedby the federal government to the various SBA programs, may also have an adverse effect on our business, results of operationsand financial condition.

Inorder for a borrower to be eligible to receive an SBA loan, the lender must establish that the borrower would not be able to securea bank loan without the credit enhancements provided by a guaranty under the SBA program. Accordingly, the SBA loans in our portfoliogenerally have weaker credit characteristics than the rest of our portfolio, and may be at greater risk of default in the eventof deterioration in economic conditions or the borrower’s financial condition. In the event of a loss resulting from defaultand a determination by the SBA that there is a deficiency in the manner in which the loan was originated, funded or serviced byus, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under theguaranty, seek recovery of the principal loss related to the deficiency from us. Management has estimated losses inherent in theoutstanding guaranteed portion of SBA loans and recorded a recourse reserve at a level determined to be appropriate. Significantincreases to the recourse reserve may materially decrease our net income, which may adversely affect our business, results ofoperations and financial condition.

Ouragriculture loans involve a greater degree of risk than other loans, and the ability of the borrower to repay may be affectedby many factors outside of the borrower’s control.

Agricultureoperating loans comprised $48.2 million and $49.9 million, or 6.7% and 9.3%, of our loan portfolio at December 31, 2020 and 2019,respectively. The repayment of agriculture operating loans is dependent on the successful operation or management of the farmproperty. Likewise, agricultural operating loans involve a greater degree of risk than lending on residential properties, particularlyin the case of loans that are unsecured or secured by rapidly depreciating assets such as farm equipment, livestock or crops.We generally secure agricultural operating loans with a blanket lien on livestock, equipment, food, hay, grain and crops. Nevertheless,any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balanceas a result of the greater likelihood of damage, loss or depreciation.

Wealso originate agriculture real estate loans. At December 31, 2020 and 2019, agricultural real estate loans totaled $48.3 millionand $48.7 million, or 6.8% and 9.0% of our total loan portfolio, respectively. Agricultural real estate lending involves a greaterdegree of risk and typically involves larger loans to single borrowers than lending on single-family residences. As with agricultureoperating loans, payments on agricultural real estate loans are dependent on the profitable operation or management of the farmproperty securing the loan. The success of the farm may be affected by many factors outside the control of the farm borrower,including adverse weather conditions that prevent the planting of a crop or limit crop yields (such as hail, drought and floods),loss of livestock due to disease or other factors, declines in market prices for agricultural products (both domestically andinternationally) and the impact of government regulations (including changes in price supports, tariffs, trade agreements, subsidiesand environmental regulations). In addition, many farms are dependent on a limited number of key individuals whose injury or deathmay significantly affect the successful operation of the farm. If the cash flow from a farming operation is diminished, the borrower’sability to repay the loan may be impaired. The primary crops in our market areas are wheat, corn and soybean. Accordingly, adversecircumstances affecting wheat, corn and soybean crops could have an adverse effect on our agricultural real estate loan portfolio.

Ourbusiness is concentrated in and dependent upon the continued growth and welfare of the markets in which we operate, includingeastern, central, southeast and southwest Kansas.

Weoperate primarily in eastern, central, southeast and southwest Kansas, and as a result, our financial condition, results of operationsand cash flows are subject to changes in the economic conditions in those areas. Although each market we operate in is geographicallyand economically diverse, our success depends upon the business activity, population, income levels, deposits and real estateactivity in each of these markets. Although our customers’ business and financial interests may extend well beyond our marketarea, adverse economic conditions that affect our specific market area could reduce our growth rate, affect the ability of ourcustomers to repay their loans to us and generally affect our financial condition and results of operations. Because of our geographicconcentration, we are less able than other regional or national financial institutions to diversify our credit risks across multiplemarkets.

Non-performingassets take significant time to resolve and adversely affect our results of operations and financial condition, and could resultin further losses in the future.

Asof December 31, 2020, our non-performing loans (which consist of non-accrual loans and loans past due 90 days or more and stillaccruing interest) totaled $10.5 million, or 1.47% of our loan portfolio, and our non-performing assets (which include non-performingloans plus real estate owned) totaled $12.3 million, or 1.03% of total assets. In addition, we had $1.5 million in accruing loansthat were 30-89 days delinquent as of December 31, 2020.

Ournon-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans orother real estate owned, thereby adversely affecting our net income and returns on assets and equity, increasing our loan administrationcosts and adversely affecting our efficiency ratio. When we take collateral in foreclosure and similar proceedings, we are requiredto mark the collateral to its then-fair market value, which may result in a loss. These non-performing loans and other real estateowned also increase our risk profile and the capital our regulators believe is appropriate in light of such risks. The resolutionof non-performing assets requires significant time commitments from management and can be detrimental to the performance of theirother responsibilities. If we experience increases in non-performing loans and non-performing assets, our net interest incomemay be negatively impacted and our loan administration costs could increase, each of which could have an adverse effect on ournet income and related ratios, such as return on assets and equity.

InterestRate Risks

Monetarypolicies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

Inaddition to being affected by general economic conditions, our earnings and growth are affected by the policies of the FederalReserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instrumentsused by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustmentsof the discount rate and changes in reserve requirements against bank deposits. These instruments are used in varying combinationsto influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affectsinterest rates charged on loans or paid on deposits.

Themonetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercialbanks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financialcondition and results of operations cannot be predicted.

Interestrates and other conditions impact our results of operations.

Ourprofitability is in part a function of the spread between the interest rates earned on investments and loans and the interestrates paid on deposits and other interest-bearing liabilities. Like most banking institutions, our net interest spread and marginwill be affected by general economic conditions and other factors, including fiscal and monetary policies of the federal governmentthat influence market interest rates and our ability to respond to changes in such rates. At any given time, our assets and liabilitieswill be such that they are affected differently by a given change in interest rates. As a result, an increase or decrease in rates,the length of loan terms or the mix of adjustable and fixed rate loans in our portfolio could have a positive or negative effecton our net income, capital and liquidity. We measure interest rate risk under various rate scenarios and using specific criteriaand assumptions. A summary of this process, along with the results of our net interest income simulations, is presented in thesection entitled Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” Although we believe our currentlevel of interest rate sensitivity is reasonable and effectively managed, significant fluctuations in interest rates may havean adverse effect on our business, financial condition and results of operations.

Changesin interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adverselyaffects the ability of borrowers to pay the principal or interest on loans may lead to an increase in non-performing assets anda reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. Further,when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income.Subsequently, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest incometo offset the associated funding expense. Thus, an increase in the amount of non-performing assets would have an adverse impacton net interest income.

Risinginterest rates will result in a decline in value of our fixed-rate debt securities. The unrealized losses resulting from holdingthese securities would be recognized in other comprehensive income and reduce total stockholders’ equity. Unrealized lossesdo not negatively impact our regulatory capital ratios; however, tangible common equity and the associated ratios would be reduced.If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capitalratios.

Interestrates on our financial instruments might be subject to change based on developments related to the LIBOR, which could adverselyimpact our revenue, expenses, and value of those financial instruments.

InJuly 2017, the Financial Conduct Authority, the authority regulating LIBOR, along with various other regulatory bodies, announcedthat LIBOR would likely be discontinued at the end of 2021. LIBOR makes up one of the most liquid and common interest rate indicesin the world and is commonly referenced in financial instruments. We have exposure to LIBOR in various aspects through our financialcontracts. Instruments that may be impacted include loans, deposits, securities, and subordinated debentures, among other financialcontracts indexed to LIBOR and that mature after December 31, 2021.

Whilethere is no consensus on what rate or rates may become accepted alternatives to LIBOR, the Alternative Reference Rates Committee,a steering committee comprised of U.S. financial market participants, selected by the Federal Reserve Bank of New York, startedin May 2018 to publish the Secured Overnight Financing Rate (“SOFR”) as an alternative to LIBOR. SOFR is a broad measureof the cost of overnight borrowings collateralized by Treasury securities that was selected by the Alternative Reference RateCommittee due to the depth and robustness of the U.S. Treasury repurchase market. At this time, it is impossible to predict whetherSOFR will become an accepted alternative to LIBOR.

Themarket transition away from LIBOR to an alternative reference rate, such as SOFR, is complex and could have a range of adverseeffects on our business, financial condition and results of operations. In particular, any such transition could:

	●	adversely affect the interest rates paid or received on, the revenue and expenses associated with, and the value of our floating-rate obligations, loans, deposits, subordinated debentures and other financial instruments tied to LIBOR rates, or other securities or financial arrangements given LIBOR’s role in determining market interest rates globally;
	●	prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with an alternative reference rate;
	●	result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of certain fallback language, or lack of fallback language, in LIBOR-based instruments; and
	●	require the transition to or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on the applicable alternative pricing benchmark, such as SOFR.

Themanner and impact of this transition, as well as the effect of these developments on our funding costs, loan and investment andtrading securities portfolios, asset-liability management, and business, is uncertain.

Declinesin value may adversely impact the carrying amount of our investment portfolio and result in other-than-temporary impairment charges.

Wemay be required to record impairment charges on our investment securities if they suffer declines in value that are consideredother-than-temporary. If the credit quality of the securities in our investment portfolio deteriorates, we may also experiencea loss in interest income from the suspension of either interest or dividend payments. Numerous factors, including lack of liquidityfor resales of certain investment securities, absence of reliable pricing information for investment securities, adverse changesin business climate or adverse actions by regulators could have a negative effect on our investment portfolio in future periods.

Downgradesin the credit rating of one or more insurers that provide credit enhancement for our state and municipal securities portfoliomay have an adverse impact on the market for and valuation of these types of securities.

Weinvest in tax-exempt and taxable state and local municipal investment securities, some of which are insured by monoline insurers.As of December 31, 2020, we had $192.2 million of municipal securities, which represented 64.7% of our total securities portfolio.Even though management generally purchases municipal securities on the overall credit strength of the issuer, the reduction inthe credit rating of an insurer may negatively impact the market for and valuation of our investment securities. Such downgradecould adversely affect our liquidity, financial condition and results of operations.

Legal,Accounting and Compliance Risks

Legislativeand regulatory reforms applicable to the financial services industry may have a significant impact on our business, financialcondition and results of operations.

Thelaws, regulations, rules, policies and regulatory interpretations governing us are constantly evolving and may change significantlyover time as Congress and various regulatory agencies react to adverse economic conditions or other matters. The implementationof any current, proposed or future regulatory or legislative changes to laws applicable to the financial industry may impact theprofitability of our business activities and may change certain of our business practices, including the ability to offer newproducts, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additionalcosts, including increased compliance costs. These regulations and legislation may be impacted by the political ideologies ofthe executive and legislative branches of the U.S. government as well as the heads of regulatory and administrative agencies,which may change as a result of elections.

TheCompany and the Bank are subject to stringent capital and liquidity requirements .

TheBasel III Rule imposes stringent capital requirements on bank holding companies and banks. In addition to the minimum capitalrequirements, banks and bank holding companies are also required to maintain a capital conservation buffer of 2.5% of Common EquityTier 1 Capital on top of minimum risk-weighted asset ratios to make capital distributions (including for dividends and repurchasesof stock) and pay discretionary bonuses to executive officers without restriction. Banking institutions that do not maintain capitalin excess of the Basel III Rule standards including the capital conservation buffer face constraints on the payment of dividends,equity repurchases and compensation based on the amount of the shortfall. Accordingly, if the Bank fails to maintain the applicableminimum capital ratios and the capital conservation buffer, distributions to the Company may be prohibited or limited.

Futureincreases in minimum capital requirements could adversely affect our net income. Furthermore, our failure to comply with the minimumcapital requirements could result in our regulators taking formal or informal actions against us which could restrict our futuregrowth or operations.

Weare subject to changes in accounting principles, policies or guidelines.

Ourfinancial performance is impacted by accounting principles, policies and guidelines. Some of these policies require the use ofestimates and assumptions that may affect the value of our assets or liabilities and financial results. Some of our accountingpolicies are critical because they require management to make difficult, subjective and complex judgments about matters that areinherently uncertain and because it is likely that materially different amounts would be reported under different conditions orusing different assumptions. If such estimates or assumptions underlying our financial statements are incorrect, we may experiencematerial losses.

Fromtime to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standardsthat govern the preparation of our financial statements, such as the implementation of CECL. These changes are beyond our control,can be difficult to predict and could materially impact how we report our financial condition and results of operations. Changesin these standards are continuously occurring, and more drastic changes may occur in the future. The implementation of such changescould have a material adverse effect on our financial condition and results of operations.

Anew accounting standard may require us to increase our allowance for loan losses and may have a material adverse effect on ourfinancial condition, amount of capital and results of operations.

TheFASB has adopted a new accounting standard that is effective for our fiscal year beginning on January 1, 2023. This standard,referred to as CECL, makes significant changes to the accounting for credit losses on financial instruments presented on an amortizedcost basis, such as our loans held for investment, and disclosures about them. The new CECL impairment model will require an estimateof expected credit losses, measured over the contractual life of an instrument, which considers reasonable and supportable forecastsof future economic conditions in addition to information about past events and current conditions. The standard provides significantflexibility and requires a high degree of judgment with regards to pooling financial assets with similar risk characteristicsand adjusting the relevant historical loss information in order to develop an estimate of expected lifetime losses. Providingfor losses over the life of our loan portfolio is a change to the previous method of providing allowances for loan losses thatare probable and incurred. This change may require us to increase our allowance for loan losses rapidly in future periods, andgreatly increases the types of data we need to collect and review to determine the appropriate level of the allowance for loanlosses. It may also result in even small changes to future forecasts having a significant impact on the allowance, which couldmake the allowance more volatile, and regulators may impose additional capital buffers to absorb this volatility.

Ourbusiness is affected from time to time by federal and state laws and regulations relating to hazardous substances.

Underthe federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), owners and operatorsof properties containing hazardous substances may be liable for the costs of cleaning up the substances. CERCLA and similar statelaws can affect us both as an owner of branches and other properties used in our business and as a lender holding a security interestin property which is found to contain hazardous substances. In particular, our branch office located in Iola is located on propertythat has been designated as a “Superfund” site under CERCLA, and we may hold mortgages on properties located in Iolathat are also designated as “Superfund” sites. While CERCLA contains an exemption for holders of security interests,the exemption is not available if the holder participates in the management of a property, and some courts have broadly definedwhat constitutes participation in management of property. Moreover, CERCLA and similar state statutes can affect our decisionwhether or not to foreclose on a property. Before foreclosing on commercial real estate, our general policy is to obtain an environmentalreport, thereby increasing the costs of foreclosure. In addition, the existence of hazardous substances on a property securinga troubled loan may cause us to elect not to foreclose on the property, thereby reducing our flexibility in handling the loan.

Operational,Strategic and Reputational Risks

Wemay experience difficulties in managing our growth, and our growth strategy involves risks that may negatively impact our netincome.

Aspart of our general strategy, we may acquire banks, branches and related businesses that we believe provide a strategic fit withour business. In the past, we have acquired a number of local banks and branches, and, to the extent that we grow through futureacquisitions, we cannot assure you that we will be able to adequately and profitably manage this growth. Acquiring other banksand businesses will involve risks commonly associated with acquisitions, including:

	●	potential exposure to unknown or contingent liabilities of banks and businesses we acquire;
	●	exposure to potential asset quality issues of the acquired bank or related business;
	●	difficulty and expense of integrating the operations and personnel of banks and businesses we acquire;
	●	potential disruption to our business;
	●	potential diversion of our management’s time and attention; and
	●	the possible loss of key employees and customers of the banks and businesses we acquire.

Inaddition to acquisitions, we may expand into additional communities or attempt to strengthen our position in our current marketsby undertaking additional branch openings. We believe that it generally takes several years for new banking facilities to firstachieve operational profitability, due to the impact of organization and overhead expenses and the start-up phase of generatingloans and deposits. To the extent that we undertake additional branch openings, we are likely to experience the effects of higheroperating expenses relative to operating income from the new operations, which may have an adverse effect on our levels of reportednet income, return on average equity and return on average assets.

Weface intense competition in all phases of our business from other banks and financial institutions.

Thebanking and financial services business in our market is highly competitive. Our competitors include large national and regionalbanks, local community banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurancecompanies, finance companies, money market mutual funds, credit unions, fintech companies, and other non-bank financial serviceproviders, many of which have greater financial, marketing and technological resources than us. Many of these competitors arenot subject to the same regulatory restrictions that we are and may be able to compete more effectively as a result. Increasedcompetition in our market may result in a decrease in the amounts of our loans and deposits, reduced spreads between loan ratesand deposit rates or loan terms that are more favorable to the borrower. Any of these results could have a material adverse effecton our ability to grow and remain profitable. If increased competition causes us to significantly discount the interest rateswe offer on loans or increase the amount we pay on deposits, our net interest income could be adversely impacted. If increasedcompetition causes us to relax our underwriting standards, we could be exposed to higher losses from lending activities. Additionally,many of our competitors are much larger in total assets and capitalization, have greater access to capital markets and offer abroader range of financial services than we can offer.

Consumersand businesses are increasingly using non-banks to complete their financial transactions, which could adversely affect our businessand results of operations.

Technologyand other changes are allowing consumers and businesses to complete financial transactions that historically have involved banksthrough alternative methods. For example, the wide acceptance of internet-based commerce has resulted in a number of alternativepayment processing systems and lending platforms in which banks play only minor roles. Customers can also maintain funds in prepaiddebit cards or digital currencies, and pay bills and transfer funds directly without the direct assistance of banks. The diminishingrole of banks as financial intermediaries has resulted and could continue to result in the loss of fee income, as well as theloss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the potentialloss of lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition andresults of operations.

Attractiveacquisition opportunities may not be available to us in the future.

Weexpect that other banking and financial service companies, many of which have significantly greater resources than us, will competewith us in acquiring other financial institutions if we pursue such acquisitions. This competition could increase prices for potentialacquisitions that we believe are attractive. Also, acquisitions are subject to various regulatory approvals. If we fail to receivethe appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests.Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwilland intangibles when considering acquisition and expansion proposals. Any acquisition could be dilutive to our earnings and stockholders’equity per share of our common stock.

Ourcommunity banking strategy relies heavily on our management team, and the unexpected loss of key managers may adversely affectour operations.

Muchof our success to date has been influenced strongly by our ability to attract and to retain senior management experienced in bankingand financial services and familiar with the communities in our market area. Our ability to retain executive officers, the currentmanagement teams, branch managers and loan officers will continue to be important to the successful implementation of our strategy.It is also critical, as we grow, to be able to attract and retain qualified additional management and loan officers with the appropriatelevel of experience and knowledge about our market area to implement our community-based operating strategy. The unexpected lossof services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could havean adverse effect on our business, financial condition and results of operations.

Wehave a continuing need for technological change, and we may not have the resources to effectively implement new technology.

Thefinancial services industry continues to undergo rapid technological changes with frequent introductions of new technology-drivenproducts and services. In addition to better serving customers, the effective use of technology increases efficiency as well asenables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs ofour customers by using technology to provide products and services that will satisfy customer demands for convenience as wellas to create additional efficiencies in our operations as we continue to grow and expand our market area. Many of our larger competitorshave substantially greater resources to invest in technological improvements. As a result, they may be able to offer additionalor superior products to those that we will be able to offer, which would put us at a competitive disadvantage. Accordingly, wecannot provide you with assurance that we will be able to effectively implement new technology-driven products and services orbe successful in marketing such products and services to our customers.

Theoccurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidentscould have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Asa bank, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that maybe committed against us or our clients, which may result in financial losses or increased costs to us or our clients, disclosureor misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigationor damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud,phishing, social engineering and other dishonest acts. Information security breaches and cybersecurity-related incidents may includefraudulent or unauthorized access to systems used by us or our clients, denial or degradation of service attacks and malware orother cyber-attacks.

Inrecent periods, there continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within thefinancial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts.Moreover, several large corporations, including financial institutions and retail companies, have suffered major data breaches,in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personalinformation of their customers and employees and subjecting them to potential fraudulent activity. Some of our clients may havebeen affected by these breaches, which could increase their risks of identity theft and other fraudulent activity that could involvetheir accounts with us.

Informationpertaining to us and our clients is maintained, and transactions are executed, on networks and systems maintained by us and certainthird party partners, such as our online banking, mobile banking or accounting systems. The secure maintenance and transmissionof confidential information, as well as execution of transactions over these systems, are essential to protect us and our clientsagainst fraud and security breaches and to maintain the confidence of our clients. Breaches of information security also may occurthrough intentional or unintentional acts by those having access to our systems or the confidential information of our clients,including employees. In addition, increases in criminal activity levels and sophistication, advances in computer capabilities,new discoveries, vulnerabilities in third party technologies (including browsers and operating systems) or other developmentscould result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactionsand to protect data about us, our clients and underlying transactions, as well as the technology used by our clients to accessour systems. Our third party partners’ inability to anticipate, or failure to adequately mitigate, breaches of securitycould result in a number of negative events, including losses to us or our clients, loss of business or clients, damage to ourreputation, the incurrence of additional expenses, disruption to our business, additional regulatory scrutiny or penalties orour exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business,financial condition, results of operations and growth prospects.

Wedepend on information technology and telecommunications systems of third parties, and any systems failures, interruptions or databreaches involving these systems could adversely affect our operations and financial condition.

Ourbusiness is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunicationssystems, third party servicers, accounting systems, mobile and online banking platforms and financial intermediaries. We outsourceto third parties many of our major systems, such as data processing and mobile and online banking. The failure of these systems,or the termination of a third party software license or service agreement on which any of these systems is based, could interruptour operations. Because our information technology and telecommunications systems interface with and depend on third party systems,we could experience service denials if demand for such services exceeds capacity or such third party systems fail or experienceinterruptions. A system failure or service denial could result in a deterioration of our ability to process loans or gather depositsand provide customer service, compromise our ability to operate effectively, result in potential noncompliance with applicablelaws or regulations, damage our reputation, result in a loss of customer business or subject us to additional regulatory scrutinyand possible financial liability, any of which could have a material adverse effect on business, financial condition, resultsof operations and growth prospects. In addition, failures of third parties to comply with applicable laws and regulations, orfraud or misconduct on the part of employees of any of these third parties, could disrupt our operations or adversely affect ourreputation.

Itmay be difficult for us to replace some of our third party vendors, particularly vendors providing our core banking and informationservices, in a timely manner if they are unwilling or unable to provide us with these services in the future for any reason andeven if we are able to replace them, it may be at higher cost or result in the loss of customers. Any such events could have amaterial adverse effect on our business, financial condition, results of operations and growth prospects.

Ouroperations rely heavily on the secure processing, storage and transmission of information and the monitoring of a large numberof transactions on a minute-by-minute basis, and even a short interruption in service could have significant consequences. Wealso interact with and rely on retailers, for whom we process transactions, as well as financial counterparties and regulators.Each of these third parties may be targets of the same types of fraudulent activity, computer break-ins and other cyber securitybreaches described above, and the cyber security measures that they maintain to mitigate the risk of such activity may be differentthan our own and may be inadequate.

Asa result of financial entities and technology systems becoming more interdependent and complex, a cyber-incident, informationbreach or loss, or technology failure that compromises the systems or data of one or more financial entities could have a materialimpact on counterparties or other market participants, including ourselves. As a result of the foregoing, our ability to conductbusiness may be adversely affected by any significant disruptions to us or to third parties with whom we interact.

Weare subject to certain operational risks, including, but not limited to, customer or employee fraud, losses related to our depositorsand data processing system failures and errors.

Employeeerrors and misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconductby our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customersor improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautionswe take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financialclaims for negligence. We are also subject to losses related to our depositors, whether due to simple errors or mistakes, circumventionof controls, or unauthorized override of controls by our employees, other financial institutions or other third parties.

Wemaintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processingsystem failures and errors and customer or employee fraud. Should our internal controls fail to prevent or detect an occurrence,or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on ourbusiness, financial condition and results of operations.

Ourframework for managing risks may not be effective in mitigating risk and loss to us.

Ourrisk management framework seeks to mitigate risk and loss to us. We have established processes and procedures intended to identify,measure, monitor, report and analyze the types of risk to which we are subject, including liquidity risk, credit risk, marketrisk, interest rate risk, operational risk, compensation risk, legal and compliance risk, cyber risk, and reputational risk, amongothers. However, as with any risk management framework, there are inherent limitations to our risk management strategies as theremay exist, or develop in the future, risks that we have not appropriately anticipated or identified. Our ability to successfullyidentify and manage risks facing us is an important factor that can significantly impact our results. If our risk management frameworkproves ineffective, we could suffer unexpected losses and could be materially adversely affected.

Weare subject to environmental liability risk associated with lending activities.

Asignificant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may forecloseon and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances couldbe found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as forpersonal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reducethe affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or morestringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability.Environmental reviews of real property before initiating foreclosure actions may not be sufficient to detect all potential environmentalhazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a materialadverse effect on our business, financial condition and results of operations.

TheBank may be required to repurchase mortgage loans in some circumstances, which could harm our liquidity, results of operationsand financial condition .

Whenthe Bank sells mortgage loans, we are required to make certain representations and warranties to the purchaser about the loansand the manner in which they were originated. Our sales agreements require us to repurchase mortgage loans in the event of a breachof any of these representations or warranties. In addition, we may be required to repurchase mortgage loans as a result of borrowerfraud or in the event of early payment default of the borrower on a mortgage loan. In 2019, we were obligated to repurchase threeloans. We were not required to repurchase any loans in 2020.

Financialservices companies depend on the accuracy and completeness of information about customers and counterparties.

Indeciding whether to extend credit or enter into other transactions, we may rely on information furnished by or on behalf of customersand counterparties, including financial statements, credit reports and other financial information. We may also rely on representationsof those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness ofthat information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information couldhave a material adverse impact on our business, financial condition and results of operations.

Thesoundness of other financial institutions could adversely affect us.

Financialservices institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposureto many different industries and counterparties, and we routinely execute transactions with counterparties in the financial servicesindustry, including brokers and dealers, commercial banks, investment banks and other institutional clients. Many of these transactionsexpose us to credit risk in the event of default by our counterparty or client. In addition, our credit risk may be exacerbatedwhen the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of theloan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect our resultsof operations or earnings.

Liquidityand Capital Risks

Ourgrowth or future losses may require us to raise additional capital in the future, but that capital may not be available when itis needed.

Weare required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. Weanticipate that our existing capital resources will satisfy our capital requirements for the foreseeable future. However, we mayat some point need to raise additional capital to support continuing growth. Our ability to raise additional capital is particularlyimportant to our strategy of growth through acquisitions. Our ability to raise additional capital depends on conditions in thecapital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry,market conditions and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure youof our ability to raise additional capital if needed on terms acceptable to us. If we cannot raise additional capital when needed,our ability to further expand our operations through internal growth and acquisitions could be materially impaired.

RisksRelated to our Common Stock

Therecan be no assurances concerning continuing dividend payments.

Ourcommon stockholders are only entitled to receive the dividends declared by our Board of Directors. Although we have historicallypaid quarterly dividends on our common stock and an annual 5% stock dividend, there can be no assurances that we will be ableto continue to pay regular quarterly dividends or an annual stock dividend or that any dividends we do declare will be in anyparticular amount. The primary source of money to pay our cash dividends comes from dividends paid to the Company by the Bank.The Bank’s ability to pay dividends to the Company is subject to, among other things, its earnings, financial conditionand applicable regulations, which in some instances limit the amount that may be paid as dividends. In addition, the Company andthe Bank are required to maintain a capital conservation buffer of 2.5% of Common Equity Tier 1 Capital on top of minimum risk-weightedasset ratios to pay dividends without additional restrictions.

Failureto pay interest on our debt may adversely impact our ability to pay dividends.

Our$21.7 million of subordinated debentures are held by three business trusts that we control. Interest payments on the debenturesmust be paid before we pay dividends on our capital stock, including our common stock. We have the right to defer interest paymentson the debentures for up to 20 consecutive quarters. However, if we elect to defer interest payments, all deferred interest mustbe paid before we may pay dividends on our capital stock. Deferral of interest payments could also cause a decline in the marketprice of our common stock.

Thereis a limited trading market for our common shares, and you may not be able to resell your shares at or above the price you paidfor them.

Althoughour common shares are listed for trading on the Nasdaq Global Market under the symbol “LARK,” the trading in our commonshares has substantially less liquidity than many other publicly traded companies. A public trading market having the desiredcharacteristics of depth, liquidity and orderliness depends on the presence in the market of willing buyers and sellers of ourcommon shares at any given time. This presence depends on the individual decisions of investors and general economic and marketconditions over which we have no control. We cannot assure you that volume of trading in our common shares will increase in thefuture.

Thestock market can be volatile, and fluctuations in our operating results and other factors could cause our stock price to decline.

Thestock market has experienced, and may continue to experience, fluctuations that significantly impact the market prices of securitiesissued by many companies. Market fluctuations could adversely affect our stock price. These fluctuations have often been unrelatedor disproportionate to the operating performance of particular companies. These broad market fluctuations, as well as generaleconomic, systemic, political and market conditions, such as recessions, loss of investor confidence, interest rate changes, tariffs,government shutdowns, Brexit, or international currency fluctuations, may negatively affect the market price of our common stock.Moreover, our operating results may fluctuate and vary from period to period due to the risk factors set forth herein. As a result,period-to-period comparisons should not be relied upon as an indication of future performance. Our stock price could fluctuatesignificantly in response to our quarterly or annual results, annual projections and the impact of these risk factors on our operatingresults or financial position.

Althoughthe Company’s common stock is quoted on The Nasdaq Global Market, the volume of trades on any given day has been limitedhistorically, as a result of which shareholders might not have been able to sell or purchase the Company’s common stockat the volume, price or time desired. In June 2020, the Company’s common stock was added to the Russell 3000® Indexbased on the total market value of shares outstanding. Inclusion in this index may have positively impacted the price, tradingvolume, and liquidity of the Company’s common stock, in part, because index funds or other institutional investors oftenpurchase securities that are in this index. There can be no assurance that the Company’s common stock will remain in thatindex, and it is projected by industry sources that the Company’s common stock will be removed from that index in 2021.If the Company’s common stock is removed from the Russell 3000® Index for any reason, including as a result of a decreasein the total market value of the Company’s outstanding shares, holders attempting to track the composition of that indexwill be required to sell the Company’s common stock, which could cause a material decrease in the price at which the Company’scommon stock trades.

ITEM1B. UNRESOLVED STAFF COMMENTS

None

ITEM2. PROPERTIES

TheCompany has 30 offices in 24 communities across Kansas: Manhattan (2), Auburn, Dodge City (2), Fort Scott (2), Garden City, GreatBend (2), Hoisington, Iola, Junction City, Kincaid, LaCrosse, Lawrence (2), Lenexa, Louisburg, Mound City, Osage City, Osawatomie,Overland Park, Paola, Pittsburg, Prairie Village, Topeka (2), Wamego and Wellsville, Kansas. The Company owns its main officein Manhattan, Kansas and 26 branch offices and leases three branch offices. The Company leases the branch offices in Topeka, Wamegoand Prairie Village, Kansas. The Company also leases a parking lot for one of the Dodge City branch offices it owns.

ITEM3. LEGAL PROCEEDINGS

Thereare no material pending legal proceedings to which the Company or the Bank is a party or of which any of their property is subject,other than ordinary routine litigation incidental to the Bank’s business. While the ultimate outcome of current legal proceedingscannot be predicted with certainty, it is the opinion of management that the resolution of these legal actions should not havea material effect on the Company’s consolidated financial position or results of operations.

ITEM4. MINE SAFETY DISCLOSURES

Notapplicable.

PARTII.

ITEM5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Ourcommon stock has traded on the Nasdaq Global Market under the symbol “LARK” since 2001. At December 31, 2020, theCompany had approximately 241 common shareholders of record and approximately 1,340 beneficial owners of our common stock.

InFebruary 2021, we declared our 78 ^th consecutive quarterly dividend, and we currently have no plans to change our dividendstrategy given our current capital and liquidity positions.

InDecember 2017, our Board of Directors approved a stock repurchase program, permitting us to repurchase up to 108,006 shares ofour common stock, which was the amount of shares remaining under our prior stock repurchase program (“December 2017 RepurchaseProgram”). Unless terminated earlier by resolution of the Board of Directors, the December 2017 Repurchase Program willexpire when we have repurchased all shares authorized for repurchase thereunder. As of December 31, 2020, there were 1,112 sharesremaining to repurchase under the December 2017 Repurchase Program. The Company repurchased 106,894 shares at an average priceof $21.69 during the year ending December 31, 2020 under the December 2017 Repurchase Program.

InMarch 2020, our Board of Directors approved a new stock repurchase plan, permitting us to repurchase up to 225,890 shares, whichrepresents approximately 5% of our outstanding common stock (“March 2020 Repurchase Program”), following repurchaseof all shares under the December 2017 Repurchase Program, under which there were 1,112 shares remaining to be repurchased as ofDecember 31, 2020. Unless terminated earlier by resolution of the Board of Directors, the March 2020 Repurchase Program will expirewhen we have repurchased all shares authorized for repurchase thereunder.

ITEM6. SELECTED FINANCIAL DATA

Notrequired.

ITEM7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SafeHarbor Statement Under the Private Securities Litigation Reform Act of 1995

Forward-LookingStatements

Thisdocument (including information incorporated by reference) contains, and future oral and written statements by us and our managementmay contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995,with respect to our financial condition, results of operations, plans, objectives, future performance and business. Forward-lookingstatements, which may be based upon beliefs, expectations and assumptions of our management and on information currently availableto management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,”“plan,” “intend,” “estimate,” “may,” “will,” “would,”“could,” “should” or other similar expressions. Additionally, all statements in this document, includingforward-looking statements, speak only as of the date they are made, and we undertake no obligation to update any statement inlight of new information or future events.

Ourability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could havea material adverse effect on operations and future prospects by us and our subsidiaries include, but are not limited to, the following:

	●	The effects of the COVID-19 pandemic, including its potential effects on the economic environment, our customers and our operations as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic.
	●	The impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges.
	●	The strength of the United States economy in general and the strength of the local economies in which we conduct our operations, including the effects of the COVID-19 pandemic on such economies, which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of our assets.
	●	The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, consumer protection, insurance, tax, trade and monetary and financial matters.
	●	The effects of changes in interest rates (including the effects of changes in the rate of prepayments of our assets) and the policies of the Federal Reserve including on our net interest income and the value of our securities portfolio.
	●	Our ability to compete with other financial institutions due to increases in competitive pressures in the financial services sector.
	●	Our inability to obtain new customers and to retain existing customers.
	●	The timely development and acceptance of products and services.
	●	Technological changes implemented by us and by other parties, including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequences to us and our customers.
	●	Our ability to develop and maintain secure and reliable electronic systems.
	●	The effectiveness of our risk management framework.
	●	The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents and our ability to identify and address such incidents.
	●	Interruptions involving our information technology and telecommunications systems or third-party servicers.
	●	Changes in and uncertainty related to the availability of benchmark interest rates used to price our loans and deposits, including the expected elimination of LIBOR and the development of a substitute.
	●	The effects of severe weather, natural disasters, widespread disease or pandemics, and other external events.
	●	Our ability to retain key executives and employees and the difficulty that we may experience in replacing key executives and employees in an effective manner.
	●	Consumer spending and saving habits which may change in a manner that affects our business adversely.
	●	Our ability to successfully integrate acquired businesses and future growth.

	●	The costs, effects and outcomes of existing or future litigation.
	●	Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the FASB, such as the implementation of CECL.
	●	The economic impact of past and any future terrorist attacks, acts of war or threats thereof, and the response of the United States to any such threats and attacks.
	●	Our ability to effectively manage our credit risk.
	●	Our ability to forecast probable loan losses and maintain an adequate allowance for loan losses.
	●	The effects of declines in the value of our investment portfolio.
	●	Our ability to raise additional capital if needed.
	●	The effects of declines in real estate markets.
	●	The effects of fraudulent activity on the part of our employees, customers, vendors, or counterparties.

Theserisks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placedon such statements. Additional information concerning us and our business, including other factors that could materially affectour financial results, is included in “Item 1A. Risk Factors.”

CORPORATEPROFILE AND OVERVIEW

LandmarkBancorp, Inc. is a financial holding company incorporated under the laws of the State of Delaware and is engaged in the bankingbusiness through its wholly-owned subsidiary, Landmark National Bank and in the insurance business through its wholly-owned subsidiary,Landmark Risk Management, Inc. The Company is listed on the Nasdaq Global Market under the symbol “LARK.” The Bankis dedicated to providing quality financial and banking services to its local communities. Our strategy includes continuing atradition of quality assets while growing our commercial, commercial real estate and agriculture loan portfolios. We are committedto developing relationships with our borrowers and providing a total banking service.

TheBank is principally engaged in the business of attracting deposits from the general public and using such deposits, together withborrowings and other funds, to originate one-to-four family residential real estate, construction and land, commercial real estate,commercial, agriculture, municipal and consumer loans. Although not our primary business function, we do invest in certain investmentand mortgage-related securities using deposits and other borrowings as funding sources.

Ourresults of operations depend generally on net interest income, which is the difference between interest income from interest-earningassets and interest expense on interest-bearing liabilities. Net interest income is affected by regulatory, economic and competitivefactors that influence interest rates, loan demand and deposit flows. In addition, we are subject to interest rate risk to thedegree that our interest-earning assets mature or reprice at different times, or at different speeds, than our interest-bearingliabilities. Our results of operations are also affected by non-interest income, such as service charges, loan fees, gains fromthe sale of newly originated loans and gains or losses on investments, and certain other non-interest related items. Our principaloperating expenses, aside from interest expense, consist of, among others, compensation and employee benefits, occupancy costs,professional fees, amortization of intangibles expense, federal deposit insurance costs, data processing expenses and provisionfor loan losses.

Weare significantly impacted by prevailing economic conditions including federal monetary and fiscal policies and federal regulationsof financial institutions. The Bank’s markets have been impacted by the COVID-19 pandemic, which has had and continues tohave a complex and significant impact on the economy. Deposit balances are influenced by numerous factors such as competing investments,the level of income and the personal rate of savings within our market areas. Factors influencing lending activities include thedemand for housing and the interest rate pricing competition from other lending institutions.

Currently,our business consists of ownership of the Bank, with its main office in Manhattan, Kansas and twenty-nine additional branch officesin central, eastern, southeast and southwest Kansas, and our ownership of Landmark Risk Management, Inc. Landmark Risk Management,Inc. is a Nevada-based captive insurance company.

CRITICALACCOUNTING POLICIES

Criticalaccounting policies are those that are both most important to the portrayal of our financial condition and results of operations,and require our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimatesabout the effect of matters that are inherently uncertain. Our critical accounting policies relate to the allowance for loan losses,the valuation of investment securities, accounting for goodwill and the accounting for income taxes, all of which involve significantjudgment by our management.

Weperform periodic and systematic detailed reviews of our lending portfolio to assess overall collectability. The level of the allowancefor loan losses reflects our estimate of the collectability of the loan portfolio. While these estimates are based on substantivemethods for determining allowance requirements, actual outcomes may differ significantly from estimated results. Additional explanationof the methodologies used in establishing this allowance is provided in the “Asset Quality and Distribution” section.

TheCompany has classified its investment securities portfolio as available-for-sale. Available-for-sale securities are recorded atfair value with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’equity, net of taxes. The Company obtains market values from a third party on a monthly basis in order to adjust the securitiesto fair value. The Company performs quarterly reviews of the investment portfolio to evaluate investment for other-than-temporaryimpairment. The Company’s assessment of other-than-temporary impairment is based on its judgment of the specific facts andcircumstances impacting each individual security at the time such assessments are made. The Company reviews and considers allfactual information, including expected cash flows, the structure of the security, the credit quality of the underlying assetsand the current and anticipated market conditions. Any credit-related impairment on debt securities is recorded through a chargeto earnings. Impairment related to other factors is recognized in other comprehensive income. However, if the Company intendsto sell or it is more likely than not that it will be required to sell a security in an unrealized loss position before recoveryof its amortized costs basis, the entire impairment is recorded through a charge to earnings.

Wehave completed several business and asset acquisitions since 2002, which have generated significant amounts of goodwill. The initialvalue assigned to goodwill is the residual of the purchase price over the fair value of all identifiable tangible and intangibleassets acquired and liabilities assumed. Goodwill is not amortized; however, it is tested for impairment at each calendar yearend or more frequently when events or circumstances dictate. The impairment test compares the carrying value of goodwill to animplied fair value of the goodwill, which is based on a review of the Company’s market capitalization adjusted for appropriatecontrol premiums as well as an analysis of valuation multiples of recent, comparable acquisitions. The Company considers the resultfrom each of these valuation methods to determine the implied fair value of its goodwill. A goodwill impairment would be recordedfor the amount that the carrying value exceeds the implied fair value. The Company performed a step one impairment test as ofDecember 31, 2020 by comparing the implied fair value of the Company’s single reporting unit to its carrying value. Fairvalue was determined using observable market data, including the Company’s market capitalization, with control premiumsand valuation multiples, compared to recent financial industry acquisition multiples for similar institutions to estimate thefair value of the Company’s single reporting unit. The Company’s step one impairment test indicated that its goodwillwas not impaired. The Company can make no assurances that future impairment tests will not result in goodwill impairments.

Theobjective of accounting for income taxes is to recognize the taxes payable or refundable for the current year and deferred taxliabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statementsor tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in financialstatements or tax returns. The Company recognizes an income tax position only if it is more likely than not that it will be sustainedupon examination by the Internal Revenue Service (the “IRS”), based upon its technical merits. Once that standardis met, the amount recorded will be the largest amount of benefit that has a greater than 50 percent likelihood of being realizedupon ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax benefits as a component ofincome tax expense in our consolidated statements of earnings. The Company assesses its deferred tax assets to determine if theitems are more likely than not to be realized and a valuation allowance is established for any amounts that are not more likelythan not to be realized. Changes in estimates regarding the actual outcome of these future tax consequences, including the effectsof IRS examinations and examinations by other state agencies, could materially impact our financial position and results of operations.

IMPACTOF COVID-19

TheCOVID-19 pandemic in the United States has had and continues to have a complex and significant adverse impact on the economy,the banking industry and the Company, all subject to a high degree of uncertainty for future periods.

Effectson Our Market Areas . Our commercial and consumer banking products and services are offered primarily in Kansas, whereindividual and governmental responses to the COVID-19 pandemic led to a broad curtailment of economic activity beginning in March2020, as a result of a stay-at-home order, which was lifted on May 3, 2020, with economic and social gatherings reopening in aphased-in approach since then. The re-opening of the economy in Kansas has resulted in increased cases of COVID-19, and additionalrestrictions have been put in place to slow the spread. These measures have had an impact on the economy of and customers locatedin Kansas. The Bank and its branches have remained open during these orders because banks have been deemed essential businesses.The Bank is currently serving its customers through its digital banking platforms and drive-thru services, with most branch lobbiesre-opened to customers. Based on the current environment, it is unclear if the State of Kansas will tighten or relax its stay-at-homeand social distancing policies going forward. The Bank will continue to monitor the situation to protect the safety and well-beingof our customers and associates.

Acrossthe United States, as a result of stay-at-home orders and other continuing restrictions, many states have experienced a dramaticincrease in unemployment levels as a result of the curtailment of business activities. The unemployment rate in Kansas was 4.7%in December 2020, which is an increase from 3.1% in December 2019. The unemployment rate peaked at 12.6% in April 2020as a result of economic impacts of the COVID-19 pandemic.

Policyand Regulatory Developments . Federal, state and local governments and regulatory authorities have enacted and issued arange of policy responses to the COVID-19 pandemic, including the following:

	●	The Federal Reserve decreased the range for the federal funds target rate by 0.5% on March 3, 2020, and by another 1.0% on March 16, 2020, reaching a current range of 0.0 – 0.25%.
	●	On March 27, 2020, President Trump signed the CARES Act, which established a $2.0 trillion economic stimulus package, including cash payments to individuals, supplemental unemployment insurance benefits and a $349 billion loan program administered through the SBA, referred to as the PPP. The Bank participates as a lender in the PPP. After the initial $349 billion in funds for the PPP was exhausted, an additional $310 billion in funding for PPP loans was authorized. In addition, on December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021, a $900.0 billion COVID-19 relief package that includes an additional $284.5 billion in PPP funding, and on March 11, 2021, President Biden signed into law an additional $1.9 trillion Federal stimulus bill in response to COVID-19.
	●	The CARES Act, as extended by the Coronavirus Response and Relief Supplemental Appropriations Act (a part of the Consolidated Appropriations Act, 2021), also provides financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. In addition, on April 7, 2020, federal banking regulators issued a revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions, which, among other things, encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and stated that institutions generally do not need to categorize COVID-19-related modifications as TDRs and that the agencies will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as TDRs.

Effectson Our Business . The COVID-19 pandemic and the specific developments referred to above have had, and are expected to continueto have, a significant impact on our business. In particular, we anticipate that a significant portion of the Bank’s borrowersin the retail, restaurant, hospitality and agriculture industries will continue to endure significant economic distress, whichmay cause them to draw on their existing lines of credit and adversely affect their ability to repay existing indebtedness, andthe COVID-19 pandemic is expected to adversely impact the value of collateral. These developments, together with economic conditionsgenerally, are also expected to impact our commercial real estate portfolio, particularly with respect to real estate with exposureto these industries, our one-to-four family residential real estate loan business and loan portfolio, and the value of certaincollateral securing our loans. As a result, we anticipate that our financial condition, capital levels and results of operationswill be significantly adversely affected, as described in further detail below.

OurResponse . We have taken numerous steps in response to the COVID-19 pandemic, including the following:

	●	We established a pandemic response team, which has been meeting as needed since mid-March to address changes resulting from the COVID-19 pandemic. We have a significant portion of our associates working from home, and for those that remain in our bank facilities, we have enhanced safety precautions in place for their safety. We have repositioned associates to support our customer care call center to handle increased volumes of customer requests and to support our customers’ access to our digital banking platforms.
	●	As a preferred lender with the SBA, we were able and prepared to immediately respond to help existing and new clients access the PPP authorized by the CARES Act. As of September 30, 2020, we funded 1,095 PPP loans totaling approximately $131.0 million. As of December 31, 2020, we had approximately $100.1 million of PPP loans outstanding. We are actively working with the PPP loan borrowers through the SBA’s forgiveness process. In addition, we are a participating lender in the second round of PPP lending. From January 1, 2021 through March 10, 2021, we funded an additional 613 PPP loans totaling approximately $43.4 million.
	●	As of December 31, 2020, we entered into short-term forbearance plans and short-term repayment plans on 3 one-to-four family residential mortgage loans totaling $366,000. We continue to work with our customers by offering loan forbearance and modifications to those impacted by COVID-19.
	●	As of December 31, 2020, we had 6 loan modifications on outstanding loan balances of $7.2 million in connection with the COVID-19 pandemic that had not yet returned to contractual terms. These modifications consisted of payment deferrals that were applied to either the full loan payment or just the principal component.
	●	With the safety and well-being of our customers and associates foremost in mind, we initially limited access to our bank lobbies while keeping our drive-thru lanes open and encouraging our customers to use our online and mobile banking applications or call our customer care call center. Currently our bank lobbies are open to customers, but we continue to evaluate this option as the number of COVID-19 cases fluctuate in our communities.

Wecurrently have no plans to change our dividend strategy given our current capital and liquidity positions. However, while we haveachieved a strong capital base and expect to continue operating profitably, this is dependent upon the projected length and depthof any economic recession and effects on our operations, profitability and capital positions in future periods, which we continueto monitor closely. In addition, we will not be permitted to make capital distributions (including for dividends and repurchasesof stock) or pay discretionary bonuses to executive officers without restriction if we do not maintain 2.5% in Common Equity Tier1 Capital attributable to a capital conservation buffer.

COMPARISONOF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019

SUMMARYOF PERFORMANCE. Net earnings for 2020 increased $8.8 million, or 82.8%, to $19.5 million as compared to $10.7 million for2019. The increase in net earnings was primarily driven by an $8.8 million increase in gains on sales of loans as low mortgagerates fueled a robust housing market and refinancing activity.

Netinterest income for 2020 increased $6.1 million to $36.5 million, or 20.2% higher than the $30.4 million recorded for 2019. Ournet interest margin, on a tax equivalent basis, increased from 3.48% during 2019 to 3.72% in 2020. The increase in net interestmargin was primarily a result of lower interest expense and the growth in loans within the asset mix. The increase in averageloan balances included an average balance of $88.5 million in PPP loans, which generated interest income of $3.0 million in 2020.

Wedistributed a 5% stock dividend for the 20th consecutive year in December 2020. All per share and average share data in this sectionreflect the 2020 and 2019 stock dividends.

InterestIncome. Interest income for 2020 increased$2.1 million to $39.3 million, an increase of 5.8% as compared to 2019. Interest income on loans increased $4.1 million, or 14.9%,to $31.8 million for 2020 as compared to $27.7 million in 2019, due primarily to the increase in our average loan balances from$518.0 million during 2019 to $668.3 million during 2020. Our average loan balances benefited from the origination of PPP loansin 2020. While the maturities of PPP loans are two or five years, we anticipate a significant amount will be forgiven during 2021,which will increase the yield on loans and reduce average loan balances. Partially offsetting the higher average balances werelower yields on loans, which decreased from 5.35% in 2019 to 4.76% in 2020. The Federal Reserve decreased the target federal fundsinterest rate by 25 basis points in each of August, September and October of 2019. In addition, in response to the COVID-19 pandemic,the Federal Reserve decreased the target federal funds interest rate by a total of 150 basis points in March 2020. These decreasesimpacted yields on loans between 2019 and 2020. In addition, the yield on PPP loans is lower than our typical commercial loans,resulting in a lower average yield on loans in 2020. We anticipate that our yield on loans will be adversely affected in futureperiods as a result originating PPP loans, to the extent the loans are not forgiven and remain on our books, and the impact ofloans repricing lower in the current rate environment. Interest income on investment securities decreased $2.0 million, or 21.0%,to $7.5 million during 2020, as compared to $9.4 million in 2019. The decrease in interest income on investment securities wasthe result of lower average balances, which decreased from $381.8 million in 2019 to $320.7 million in 2020, and lower rates,which decreased from 2.70% in 2019 to 2.58% in 2020.

InterestExpense. Interest expense during 2020 decreased$4.0 million, or 59.0%, to $2.8 million as compared to 2019. Interest expense on interest-bearing deposits decreased $3.2 million,or 60.6%, to $2.1 million for 2020 as compared to $5.3 million in 2019. Our total cost of interest-bearing deposits decreasedfrom 0.83% during 2019 to 0.31% during 2020 as a result of lower rates paid on money market and checking accounts that have ratesthat reprice based on market indexes and lower rates on our certificates of deposit. Our decline in deposit rates during 2020reflected the decreased federal funds interest rate and other market interest rates. As these rates are now near zero, we do notexpect significant reductions in our cost of deposits in future periods. Partially offsetting the lower interest rates was anincrease in average interest-bearing deposit balances, which increased from $646.8 million in 2019 to $673.2 million in 2020.Interest expense on borrowings decreased $752,000, or 53.1%, to $664,000 during 2020 as compared to $1.4 million in 2019. Contributingto lower interest expense on borrowings were lower average outstanding borrowings, which decreased from $51.3 million in 2019to $38.8 million during 2020, as well as lower rates paid on borrowings, which decreased from 2.76% in 2019 to 1.71% in 2020.

NetInterest Income. Net interest income representsthe difference between income derived from interest-earning assets and the expense incurred on interest-bearing liabilities. Netinterest income is affected by both the difference between the rates of interest earned on interest-earnings assets and the ratespaid on interest-bearing liabilities (“interest rate spread”) as well as the relative amounts of interest-earningassets and interest-bearing liabilities.

Asa result of the COVID-19 pandemic, we originated approximately $131.0 million of PPP loans during 2020. These loans have an interestrate of 1.00% plus the amortization of the origination fee, which resulted in a yield of 3.40% on PPP loans in 2020. The maturitydate of these loans is two or five years unless the borrower’s loan is forgiven, in which case the loan would be repaidsooner. While the cost of our funds is lower than the yield on these loans, the interest rate spread is lower than we generallyhave received on other loans. As a result of the origination of PPP loans and our participation in the second round of PPP fundingin 2021, to the extent PPP loans we originate are not forgiven, our net interest income may increase in future periods, but ournet interest margin may be negatively affected by the lower interest rates on PPP loans. The balance of PPP loans was $100.1 millionat December 31, 2020, after a portion of the loans had been forgiven. The average balance of PPP loans during 2020 was $88.5 millionwhich generated interest income of $3.0 million. There were $2.0 million of origination fees remaining to be accreted into incomeat December 31, 2020. In addition, the COVID-19 pandemic has slowed our origination of new loans, which may lead to lower netinterest income and net interest margin in future periods as a result of lower loan volumes. The decline in market interest rateswill adversely impact our net interest income and net interest margin as a result of lower yields on loans and investment securitiesexceeding the benefit of a lower cost of funds.

During2020, net interest income increased $6.1 million, or 20.2%, to $36.5 million compared to $30.4 million in 2019. Our net interestmargin, on a tax-equivalent basis, increased to 3.72% during 2020 from 3.48% during 2019. The increase in net interest incomewas primarily due to a 11.7% increase in our average interest-earning assets from $900.5 million in 2019 to $1.0 billionin 2020 and also due to decreases in deposit rates that caused deposit expense to decline. We may not be able to continueto increase our net interest margin if our loan growth slows or the yields on our interest-earning assets decline faster thanour cost of interest-bearing liabilities.

Provisionfor Loan Losses. We maintain, and our Boardof Directors monitors, an allowance for losses on loans. The allowance is established based upon management’s periodic evaluationof known and inherent risks in the loan portfolio, review of significant individual loans and collateral, review of delinquentloans, past loss experience, adverse situations that may affect the borrowers’ ability to repay, current and expected marketconditions, and other factors management deems important. Determining the appropriate level of reserves involves a high degreeof management judgment and is based upon historical and projected losses in the loan portfolio and the collateral value or discountedcash flows of specifically identified impaired loans. Additionally, allowance policies are subject to periodic review and revisionin response to a number of factors, including current market conditions, actual loss experience and management’s expectations.

During2020, we recorded a provision for loan losses of $3.3 million compared to $1.4 million in 2019. We recorded net loan charge-offsof $992,000 during 2020 compared to net loan charge-offs of $698,000 during 2019. The increase in the provision for loan lossesreflected loan growth and uncertainty in the economic environment considering the effects of the COVID-19 pandemic. As the economicoutlook evolves and our pandemic-related loss experience develops, Landmark will adjust the allowance for loan losses and provisioningwill be adjusted accordingly.

Non-interestIncome. Total non-interest income was $27.4million in 2020, an increase of $11.5 million, or 73.1%, compared to 2019. The increase in non-interest income was primarily theresult of increases of $8.8 million in gains on sales of loans, and $354,000 in fees and service charges. Also contributing tothe increase in non-interest income was $2.4 million in gains on sales of investment securities due to approximately $61 millionof mortgage-backed investment securities sold during 2020. A loss of $177,000 was recorded on sales of investment securities during2019. Partially offsetting the increases in non-interest income was a decrease of $141,000 in bank owned life insuranceincome. The increase in gains on sales of loans was driven by higher volumes of one-to-four family residential real estate loansoriginated, due to the decline in mortgage interest rates that have fueled a robust housing market and refinancing activity. Thehigher fees and service charges were primarily due to higher fee income on deposit accounts. The decrease in bank owned life insuranceincome was due to a death claim payment received in 2019.

Non-interestExpense. Non-interest expense increased $3.6million, or 11.1%, to $36.3 million in 2020 compared to $32.6 million in 2019. The increase was primarily due to an increase of$2.9 million, or 16.1%, in compensation and benefits as a result of increases in mortgage lending incentives and as wellas general increases in compensation. Also contributing to higher non-interest expense were increases of $396,000 in amortizationof intangibles due to the accelerated prepayments on mortgage servicing rights and $185,000 in data processing due to the increasein the number of accounts and products that are offered. Our federal deposit insurance premiums increased $162,000 as a resultof utilizing the FDIC assessment credits in 2019 and the first quarter of 2020. Partially offsetting those increases in non-interestexpense was a decrease of $99,000 in professional fees due to a decrease in costs associated with an external audit of our internalcontrols over financial reporting which is no longer required as we no longer qualify as an accelerated filer by the rules ofthe SEC.

INCOMETAXES. During 2020, we recorded income tax expense of $4.8 million compared to income tax expense of $1.5 million in 2019.The effective tax rate increased from 12.0% in 2019 to 19.7% in 2020, primarily due to an increase in earnings before income taxes,while tax-exempt income declined over the comparable periods. In addition, income tax expense included the recognition of $229,000and $558,000 in 2020 and 2019, respectively, of previously unrecognized tax benefits, reducing the effective tax rate in bothperiods.

COMPARISONOF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND DECEMBER 31, 2018

Fora discussion of the results of operations for the year ended December 31, 2019 compared with the year ended December 31, 2018,refer to Item 7 of the Company’s 2019 Annual Report on Form 10-K, filed with the SEC on March 12, 2020, which is incorporatedherein by reference.

QUARTERLYRESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)
		2020 Quarters Ended
		March 31				June 30				September 30				December 31
Interest income		$	9,318			$	9,641			$	9,757			$	10,537
Interest expense			1,216				626				490				437
Net interest income			8,102				9,015				9,267				10,100
Provision for loan losses			1,200				400				1,000				700
Net interest income after provision for loan losses			6,902				8,615				8,267				9,400
Non-interest income			5,353				6,972				8,165				6,868
Non-interest expense			8,107				9,116				9,522				9,517
Earnings before income taxes			4,148				6,471				6,910				6,751
Income tax expense			785				1,371				1,483				1,148
Net earnings		$	3,363			$	5,100			$	5,427			$	5,603
Earnings per share (1):
Basic		$	0.70			$	1.08			$	1.14			$	1.18
Diluted		$	0.70			$	1.08			$	1.14			$	1.18

		2019 Quarters Ended
		March 31				June 30				September 30				December 31
Interest income		$	8,884			$	9,293			$	9,445			$	9,489
Interest expense			1,688				1,812				1,786				1,471
Net interest income			7,196				7,481				7,659				8,018
Provision for loan losses			200				400				400				400
Net interest income after provision for loan losses			6,996				7,081				7,259				7,618
Non-interest income			3,256				3,988				4,555				4,010
Non-interest expense			7,728				7,965				8,618				8,337
Earnings before income taxes			2,524				3,104				3,196				3,291
Income tax expense			341				506				583				23
Net earnings		$	2,183			$	2,598			$	2,613			$	3,268
Earnings per share (1):
Basic		$	0.45			$	0.54			$	0.54			$	0.68
Diluted		$	0.45			$	0.54			$	0.54			$	0.67

(1)

All per share amounts have been adjusted to give effect to the 5% stock dividends paid during December 2020 and 2019.

FINANCIALCONDITION. Economic conditions in the United States deteriorated during 2020 as the impact of COVID-19 caused portions ofthe economy to shut down or be subject to operating restrictions. On March 28, 2020, a stay at home order was issued for the entirestate of Kansas, which expanded previously issued local orders. This stay at home order was lifted on May 3, 2020 with a phasedapproach to reopening the Kansas economy, but the effects of the stay at home order and reopening restrictions continue to havean effect on the economies in our market areas. As the economy has reopened, the State of Kansas has experienced an increase inthe number of COVID-19 cases. The State of Kansas and the geographic markets in which the Company operates have been significantlyimpacted by this pandemic. The Company’s allowance for loan losses included estimates of the economic impact of COVID-19on our loan portfolio. COVID-19 will likely continue to cause an increase in our delinquent and non-accrual loans as the economicslowdown impacts our customers. However, our loan portfolio is diversified across various types of loans and collateral throughoutthe markets in which we operate. Aside from a few problem loans that management is working to resolve, our asset quality has remainedstrong over the past few years. While we anticipate further increases in problem assets as a result of COVID-19, management believesits efforts to run a high quality financial institution with a sound asset base will continue to create a strong foundation forcontinued growth and profitability in the future.

AssetQuality and Distribution. Our primary investingactivities are the origination of one-to-four family residential real estate, construction and land, commercial real estate, commercial,agriculture, municipal and consumer loans and the purchase of investment securities. Total assets increased $189.6 million, or19.0%, to $1.2 billion at December 31, 2020, compared to $998.5 million at December 31, 2019. The increase in our total assetswas primarily the result of a $170.6 million, or 32.1%, increase in net loans, excluding loans held for sale, which increasedto $702.8 million at December 31, 2020 from $532.2 million at December 31, 2019. Our loan growth in 2020 was primarily due tothe origination of PPP loans which totaled $100.1 million at December 31, 2020. Investment securities available-for-saledecreased $65.7 million from $363.0 million at December 31, 2019 to $297.3 million at December 31, 2020.

Theallowance for loan losses is established through a provision for loan losses based on our evaluation of the risk inherent in theloan portfolio and changes in the nature and volume of our loan activity. This evaluation, which includes a review of all loanswith respect to which full collectability may not be reasonably assured, considers the fair value of the underlying collateral,economic conditions, historical loan loss experience, level of classified loans and other factors that warrant recognition inproviding for an appropriate allowance for loan losses. If the COVID-19 pandemic or other factors cause economic declines in excessof our estimations, or if the pandemic lasts longer than currently projected, our provision for loan losses may remain elevatedor increase in future period. We will continue to monitor our allowance for loan losses in light of changing economic conditionsrelated to COVID-19. At December 31, 2020, our allowance for loan losses totaled $8.8 million, or 1.23% of gross loans outstanding,as compared to $6.5 million, or 1.20% of gross loans outstanding, at December 31, 2019. The allowance for loan losses to grossloans outstanding was impacted by the $100.1 million of PPP loans which are guaranteed by the SBA and have no allowance allocatedas of December 31, 2020.

Asof December 31, 2020 and 2019, approximately $25.2 million and $18.1 million, respectively, of loans were considered classifiedand assigned a risk rating of special mention, substandard or doubtful. The increase in classified loans was primarily due tothe impact of COVID-19 and weakness in the agriculture industry, which deteriorated further due to the pandemic. COVID-19 hasalso impacted our commercial and commercial real estate portfolios, with borrowers in the restaurant, accommodations and hotelindustries experiencing the largest declines in revenues. These ratings indicate that the loans identified as potential problemloans have more than normal risk which raised doubts as to the ability of the borrower to comply with present loan repayment terms.Even though these borrowers were experiencing moderate cash flow problems as well as some deterioration in collateral value, managementbelieved the general allowance was sufficient to cover the risks and probable incurred losses related to such loans at December31, 2020 and 2019, respectively.

Loanspast due 30-89 days and still accruing interest totaled $1.5 million, or 0.22% of gross loans, at December 31, 2020, comparedto $3.4 million, or 0.64% of gross loans, at December 31, 2019. At December 31, 2020, $10.5 million of loans were on non-accrualstatus, or 1.47% of gross loans, compared to $5.5 million, or 1.03% of gross loans, at December 31, 2019. The increasein non-performing loans primarily related to two commercial real estate loan relationships totaling $5.5 million. Non-accrualloans consist of loans 90 or more days past due and certain impaired loans. There were no loans 90 days delinquent and accruinginterest at December 31, 2020 and 2019. Our impaired loans totaled $12.5 million December 31, 2020 compared to $8.7 million atDecember 31, 2019. The difference in the Company’s non-accrual loan balances and impaired loan balances at December 31,2020 and December 31, 2019 was related to TDRs that were accruing interest but still classified as impaired.

AtDecember 31, 2020, the Company had nine loan relationships consisting of 21 outstanding loans totaling $3.9 million that wereclassified as TDRs compared to nine relationships consisting of thirteen outstanding loans totaling $3.6 million that were classifiedas TDRs at December 31, 2019.

During2020, the Company modified the payment terms on an agriculture loan totaling $156,000 and classified the restructuring as a TDR.The loans relating to a $1.6 million loan relationship, consisting of two one-to-our family loans, one construction and land loan,two commercial real estate loans and one commercial loan, were classified as TDRs during 2020 after negotiating restructuringagreements with the borrowers. The restructuring included a charge-off of $50,000. The loans relating to one commercial loan relationship,with five loans totaling $742,000, were classified as TDRs during 2020, after the payments were modified to interest only. Allof the loans classified as TDRs were experiencing financial difficulties prior to the COVID-19 pandemic. An agriculture loan,commercial real estate loan and a one-to-four family residential real estate loan previously classified as TDRs in 2017, 2015and 2016, respectively, paid off during 2020.

TheCompany did not classify any loans as TDRs during 2019. A commercial real estate loan previously classified as a TDR in 2014 paidoff during 2019.

During2018, the Company classified an agriculture loan totaling $64,000 as a TDR after originating a loan to an existing loan relationshipthat was classified as a TDR in 2016. As part of the restructuring, the borrower paid off three loans previously classified asTDRs. Since the agriculture loan relationship was adequately secured, no impairments were recorded against the principal as ofDecember 31, 2020. The Company also classified a $36,000 commercial loan as a TDR after extending the maturity of the loan during2018. The commercial loan had a $8,000 impairment recorded against the principal balance as of December 31, 2020. An agricultureloan relationship consisting of two loans that were originally classified as TDRs during 2015 and a municipal loan that was classifiedas a TDR in 2010 were both paid off in 2018.

Asof December 31, 2020, the Company had 6 loan modifications on outstanding loan balances of $7.2 million in connection with theCOVID-19 pandemic that had not yet returned to contractual terms that, per regulatory guidance, are not deemed to be TDRs. Thesemodifications consisted of payment deferrals that were applied to either the full loan payment or just the principal component.One commercial real estate loan totaling $3.7 million that was modified was also on non-accrual status as of December 31, 2020.Consistent with the CARES Act and Joint Interagency Regulatory Guidance, the Company also entered into short-term forbearanceplans and short-term repayment plans on three one-to-four family residential mortgage loans totaling $366,000 as of December31, 2020, which were not classified as TDRs.

Aspart of our credit risk management, we continue to manage the loan portfolio to identify problem loans and have placed additionalemphasis on commercial real estate and construction and land relationships. We are working to resolve the remaining problem creditsor move the non-performing credits out of the loan portfolio. At December 31, 2020, we had $1.8 million of real estate owned comparedto $290,000 at December 31, 2019. The increase in real estate owned as of December 31, 2020 compared to December 31, 2019 wasprimarily due to obtaining the collateral securing non-performing commercial real estate and one-to-four family residential realestate loans. As of December 31, 2020, real estate owned consisted of commercial buildings, undeveloped land and residentialreal estate. The Company is currently marketing all of the remaining properties in real estate owned.

LiabilityDistribution. Our primary ongoing sourcesof funds are deposits, FHLB borrowings, proceeds from principal and interest payments on loans and investment securities and proceedsfrom the sale of mortgage loans and investment securities. While maturities and scheduled amortization of loans are a predictablesource of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates and economic conditions.We experienced an increase of $181.0 million, or 21.7% in total deposits during 2020, to $1.0 billion at December 31, 2020, from$835.0 million at December 31, 2019. The increase in deposits was primarily due to deposit growth in all categories of depositswith the exception of time deposits. The increase in deposits was related to PPP loan proceeds, government stimulus payments andcustomers increasing their liquidity positions. Additionally, checking account balances increased as a result of customers migratingfrom repurchase agreements to checking account products providing FDIC insurance coverage on higher balances. The decrease intime deposits was associated with the lower public funds balances.

Totalborrowings decreased $14.2 million, or 33.6%, to $28.0 million at December 31, 2020, from $42.2 million at December 31, 2019.The decline in borrowings was the result of a $3.0 million decrease in our FHLB line of credit borrowings from $3.0 million atDecember 31, 2019 to no FHLB borrowings at December 31, 2020 and lower repurchase agreement balance as customers have migratedto other deposit accounts.

Non-interest-bearingdeposits at December 31, 2020, were $264.9 million, or 26.1% of deposits, compared to $182.7 million, or 21.9% of deposits, atDecember 31, 2019. Money market and checking accounts were 48.3% of our deposit portfolio and totaled $491.3 million at December31, 2020, compared to $405.7 million, or 48.6% of deposits, at December 31, 2019. Savings accounts increased to $126.1 million,or 12.4% of deposits, at December 31, 2020, from $99.5 million, or 11.9% of deposits, at December 31, 2019. Certificates of deposittotaled $133.7 million, or 13.2% of deposits, at December 31, 2020, compared to $147.1 million, or 17.6% of deposits, at December31, 2019. Competition for deposits may affect our ability to continue to increase deposit balances and could result in a decreasein our deposit balances in future periods.

Certificatesof deposit at December 31, 2020, scheduled to mature in one year or less totaled $112.3 million. Historically, maturing depositshave generally remained with the Bank, and we believe that a significant portion of the deposits maturing in one year or lesswill remain with us upon maturity in some type of deposit account.

CASHFLOWS. During 2020, our cash and cash equivalents increased by $71.1 million. Our operating activities provided net cash of$14.8 million in 2020, which is primarily the result of net earnings and sales of one-to-four family residential mortgageloans. Our investing activities used net cash of $104.6 million during 2020, primarily as a result of increases in loans.Our financing activities provided net cash of $160.9 million during 2020, primarily as a result of an increase in deposits.

Liquidity. Our most liquid assets are cash and cashequivalents and investment securities available-for-sale. The levels of these assets are dependent on the operating, financing,lending and investing activities during any given year. These liquid assets totaled $382.1 million at December 31, 2020 and $376.7million at December 31, 2019. During periods in which we are not able to originate a sufficient amount of loans and/or periodsof high principal prepayments, we generally increase our liquid assets by investing in short-term, high-grade investments.

Liquiditymanagement is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments.Excess funds are typically generated as a result of increased deposit balances, while uses of excess funds are generally depositwithdrawals and loan advances. In the event we require funds beyond our ability to generate them internally, additional fundsare generally available through the use of brokered deposits, FHLB advances, a line of credit with the FHLB, other borrowingsor through sales of investment securities. At December 31, 2020, we had no outstanding balance against our line of credit withthe FHLB. At December 31, 2020, we had collateral pledged to the FHLB that would allow us to borrow $56.4 million, subject toFHLB credit requirements and policies. At December 31, 2020, we had no borrowings through the Federal Reserve discount window,while our borrowing capacity with the Federal Reserve was $103.8 million. We also have various other federal funds agreements,both secured and unsecured, with correspondent banks totaling approximately $30.0 million in available credit under which we hadno outstanding borrowings at December 31, 2020. At December 31, 2020, we had subordinated debentures totaling $21.7 million andother borrowings of $6.4 million, which consisted of repurchase agreements. At December 31, 2020, the Company had no borrowingsagainst a $7.5 million line of credit from an unrelated financial institution that matures on November 1, 2021, with an interestrate that adjusts daily based on the prime rate less 0.25%. This line of credit has covenants specific to capital and other financialratios, which the Company was in compliance with at December 31, 2020. The Company is eligible to pledge PPP loans to the FederalReserve’s Paycheck Protection Program Liquidity Facility for additional liquidity, but the Company has not utilized thisfacility to date.

OFF-BALANCESHEET ARRANGEMENTS. As a provider of financial services, we routinely issue financial guarantees in the form of financialand performance standby letters of credit. Standby letters of credit are contingent commitments issued by us generally to guaranteethe payment or performance obligation of a customer to a third party. While these standby letters of credit represent a potentialoutlay by us, a significant amount of the commitments may expire without being drawn upon. We have recourse against the customerfor any amount the customer is required to pay to a third party under a standby letter of credit. The letters of credit are subjectto the same credit policies, underwriting standards and approval process as loans made by us. Most of the standby letters of creditare secured, and in the event of nonperformance by the customers, we have the right to the underlying collateral, which couldinclude commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities. The contractamount of these standby letters of credit, which represents the maximum potential future payments guaranteed by us, was $2.2 millionat December 31, 2020.

AtDecember 31, 2020, we had outstanding loan commitments, excluding standby letters of credit, of $145.1 million. We anticipatethat sufficient funds will be available to meet current loan commitments. These commitments consist of unfunded lines of creditand commitments to finance real estate loans.

CAPITAL. Current regulatory capital regulations require financial institutions (including banks and bank holding companies) to meetcertain regulatory capital requirements. The Company and the Bank are subject to the Basel III Rule that implemented the BaselIII regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-FrankAct. The Basel III Rule is applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank andsavings and loan holding companies other than “small bank holding companies” (generally, non-public bank holding companieswith consolidated assets of less than $3.0 billion).

TheBasel III Rule requires a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a Tier 1 capital to risk-weightedassets minimum ratio of 6.0%, a Total Capital to risk-weighted assets minimum ratio of 8.0%, and a Tier 1 leverage minimum ratioof 4.0%. A capital conservation buffer, equal to 2.5% common equity Tier 1 capital, is also established above the regulatory minimumcapital requirements (other than the Tier 1 leverage ratio). At December 31, 2020, the Bank maintained a leverage ratio of 10.47%and a total risk-based capital ratio of 17.50%. As shown by the following table, the Bank’s capital exceeded the minimumcapital requirements in effect at December 31, 2020, including the capital conservation buffers.

		Actual				Actual				Minimum				Minimum
(dollars in thousands)		amount				percent				amount				percent(1)
Leverage		$	118,174				10.47	%		$	45,139				4.00	%
Common Equity Tier 1 Capital			118,174				16.27	%			50,829				7.00	%
Tier 1 Capital			118,174				16.27	%			61,721				8.50	%
Total risk-based Capital			127,089				17.50	%			76,244				10.50	%

(1)

The minimum required percent includes a capital conservation buffer of 2.5%.

Webelieve the Company has adequate capital to withstand the impact of the COVID-19 pandemic and any economic downturn on our assetquality and net earnings. The Company performs stress tests on the loan portfolio to measure the impact of severe economic recessionson its capital levels to help it monitor capital levels in connection with the COVID-19 pandemic.

Banksand bank holding companies are generally expected to operate at or above the minimum capital requirements. The Company’sand the Bank’s ratios above are well in excess of regulatory minimums. As of December 31, 2020 and 2019, the Company andthe Bank also exceeded the “well capitalized” thresholds, which is the highest rating available. There are no conditionsor events that management believes have changed the Company’s and the Bank’s category as of the date of this report.We have $21.7 million in trust preferred securities which, in accordance with current capital guidelines, have been included incapital as of December 31, 2020. Cash distributions on the securities are payable quarterly, are deductible for income tax purposesand are included in interest expense in the consolidated financial statements.

DIVIDENDS

Duringthe year ended December 31, 2020, we paid quarterly cash dividends of $0.19 per share to our stockholders, as adjusted to giveeffect to 5% stock dividend, which we distributed for the 20th consecutive year in December 2020. The 2019 quarterly cash dividendswere $0.18 per share as adjusted to give effect to 5% stock dividends.

Thepayment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capitalpursuant to applicable capital adequacy guidelines and regulations. As described above, the Bank exceeded its minimum capitalrequirements under applicable guidelines as of December 31, 2020. The National Bank Act imposes limitations on the amount of dividendsthat a national bank may pay without prior regulatory approval. Generally, the amount is limited to the bank’s current year’snet earnings plus the adjusted retained earnings for the two preceding years. As of December 31, 2020, $19.9 million wasavailable to be paid as dividends to the Company by the Bank without prior regulatory approval.

Additionally,our ability to pay dividends is limited by the subordinated debentures associated with the trust preferred securities that areheld by three business trusts that we control. Interest payments on the debentures must be paid before we pay dividends on ourcapital stock, including our common stock. We have the right to defer interest payments on the debentures for up to 20 consecutivequarters. However, if we elect to defer interest payments, all deferred interest must be paid before we may pay dividends on ourcapital stock.

EFFECTSOF INFLATION

Ourconsolidated financial statements and accompanying footnotes have been prepared in accordance with U.S. generally accepted accountingprinciples (“GAAP”), which generally require the measurement of financial position and operating results in termsof historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation.The impact of inflation can be found in the increased cost of our operations because our assets and liabilities are primarilymonetary, and interest rates have a greater impact on our performance than do the effects of inflation.

ITEM7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ourassets and liabilities are principally financial in nature, and the resulting net interest income thereon is subject to changesin market interest rates and the mix of various assets and liabilities. Interest rates in the financial markets affect our decisionson pricing our assets and liabilities which impacts our net interest income, a significant cash flow source for us. As a result,a substantial portion of our risk management activities relates to managing interest rate risk.

OurAsset/Liability Management Committee monitors the interest rate sensitivity of our balance sheet using earnings simulation modelsand interest sensitivity “gap” analysis. We have set policy limits of interest rate risk to be assumed in the normalcourse of business and monitor such limits through our simulation process.

Inthe past, we have been successful in meeting the interest rate sensitivity objectives set forth in our policy. Simulation modelsare prepared to determine the impact on net interest income for the coming twelve months, including using rates at December 31,2020 and forecasting volumes for the twelve-month projection. This position is then subjected to a shift in interest rates of100 and 200 basis points rising and 100 basis points falling with an impact to our net interest income on a one-year horizon asfollows:

Scenario		$000’s change in net interest income				% change in net interest income
200 basis point rising		$	(99	)			(0.3	)%
100 basis point rising		$	(169	)			(0.5	)%
100 basis point falling		$	(180	)			(0.5	)%

ASSET/LIABILITYMANAGEMENT

Interestrate “gap” analysis is a common, though imperfect, measure of interest rate risk which measures the relative dollaramounts of interest-earning assets and interest-bearing liabilities which reprice within a specific time period, either throughmaturity or rate adjustment. The “gap” is the difference between the amounts of such assets and liabilities that aresubject to such repricing. A “positive” gap for a given period means that the amount of interest-earning assets maturingor otherwise repricing within that period exceeds the amount of interest-bearing liabilities maturing or otherwise repricing duringthat same period. In a rising interest rate environment, an institution with a positive gap would generally be expected, absentthe effects of other factors, to experience a greater increase in the yield of its assets relative to the cost of its liabilities.Conversely, the cost of funds for an institution with a positive gap would generally be expected to decline less quickly thanthe yield on its assets in a falling interest rate environment. Changes in interest rates generally have the opposite effect onan institution with a “negative” gap.

Thefollowing is our “static gap” schedule. One-to-four family residential real estate and consumer loans include prepaymentassumptions, while all other loans assume no prepayments. Mortgage-backed securities include published prepayment assumptions,while all other investments assume no prepayments.

Certificatesof deposit reflect contractual maturities only. Money market accounts are rate sensitive, and accordingly, a higher percentageof the accounts have been included as repricing immediately in the first period. Savings and NOW accounts are not as rate sensitiveas money market accounts, and for that reason a significant percentage of the accounts are reflected in the 1-to-5 year category.

Wehave been successful in meeting the interest sensitivity objectives set forth in our policy. This has been accomplished primarilyby managing the assets and liabilities while maintaining our traditional high credit standards.

INTEREST-EARNINGASSETS AND INTEREST-BEARING LIABILITIES REPRICING SCHEDULE

(“GAP”TABLE)

As of December 31, 2020
		3 months or less				3 to 12 months				1 to 5 years				Over 5 years				Total
		(Dollars in thousands)
Interest-earning assets:
Investment securities		$	14,712			$	29,907			$	170,551			$	86,573			$	301,743
Loans			228,151				244,593				223,491				22,080				718,315
Total interest-earning assets		$	242,863			$	274,500			$	394,042			$	108,653			$	1,020,058
Interest-bearing liabilities:
Certificates of deposit		$	53,393			$	58,943			$	21,411			$	3			$	133,750
Money market and checking accounts			4,453				13,358				385,808				87,656				491,275
Savings accounts			-				-				100,899				25,225				126,124
Borrowed money			28,022				-				-				-				28,022
Total interest-bearing liabilities		$	85,868			$	72,301			$	508,118			$	112,884			$	779,171
Interest sensitivity gap per period		$	156,995			$	202,199			$	(114,076	)		$	(4,231	)		$	240,887
Cumulative interest sensitivity gap			156,995				359,194				245,118				240,887
Cumulative gap as a percent of total interest-earning assets			15.39	%			35.21	%			24.03	%			23.62	%
Cumulative interest sensitive assets as a percent of cumulative interest sensitive liabilities			282.83	%			327.10	%			136.79	%			130.92	%

ITEM8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholdersand the Board of Directors

LandmarkBancorp, Inc. and Subsidiaries

Manhattan,Kansas

Opinionon the Financial Statements

Wehave audited the accompanying consolidated balance sheets of Landmark Bancorp, Inc. and Subsidiaries (the “Company”)as of December 31, 2020 and 2019, the related consolidated statements of earnings, comprehensive income, stockholders’ equity,and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referredto as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows foreach of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted inthe United States of America.

Basisfor Opinion

Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion onthe Company’s financial statements based on our audits. We are a public accounting firm registered with the Public CompanyAccounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commissionand the PCAOB.

Weconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to erroror fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financialreporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but notfor the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.

Ouraudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due toerror or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principlesused and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.We believe that our audits provide a reasonable basis for our opinion.

CriticalAudit Matter

Thecritical audit matter communicated below is a matter arising from the current period audit of the financial statements that wascommunicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are materialto the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication ofthe critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not,by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accountsor disclosures to which it relates.

Allowancefor Loan Losses – Qualitative factors

Asdescribed in Note 1 and Note 5 to the consolidated financial statements, the Company’s allowance for loan lossesrepresents management’s best estimate of probable incurred losses in the loan portfolio. The allowance for loanlosses was $8,775,000 at December 31, 2020, which consists of two components: the valuation allowance for loans individuallyevaluated for impairment (“specific component”), representing $266,000, and the valuation allowance for loanscollectively evaluated for impairment (“general component”), representing $8,509,000. The general component isbased on the Company’s historical loss experience, adjusted for qualitative factors.

Thequalitative factors include changes in lending policies and procedures, including changes in underwriting standards; changes ininternational, national, regional, and local economic and business conditions; changes in the nature, volume, and terms of loansin the portfolio; changes in the lending management and lending staff; changes in the volume and severity of past due loans, nonaccrualloans, and adversely classified loans; changes in the loan review function; changes in the value of underlying collateral; theexistence of and changes in credit concentrations; and other external factors. Management applied significant judgmentto determine the effect of the qualitative factors. We identified auditing the effect of the qualitative factorson the allowance for loan losses as a critical audit matter as it involved especially subjective auditor judgment to audit management’sdetermination and application of the qualitative factors.

Oursubstantive audit procedures to address the critical audit matter related to the allowance loan losses qualitative factorsincluded the following:

	●	Tested the completeness and accuracy of the data inputs used as a basis for the qualitative factors to source documentation.
	●	Evaluated the reasonableness of management’s judgments related to the internal and external data used in the determination of the qualitative factors and the resulting allocation to the allowance.
	●	Analytically evaluated the qualitative factors year over year for directional consistency, including the magnitude of the adjustments.
	●	Tested the mathematical accuracy of the allowance calculation, including the application of the qualitative factors.

/s/ Crowe LLP

Wehave served as the Company’s auditor since 2014.

OakBrook, Illinois

March22, 2021

LANDMARKBANCORP, INC. AND SUBSIDIARIES

ConsolidatedBalance Sheets

		2020				2019
(Dollars in thousands)		December 31,
		2020				2019
Assets
Cash and cash equivalents		$	84,818			$	13,694
Investment securities available-for-sale, at fair value			297,270				362,998
Bank stocks, at cost			4,473				3,109
Loans, net of allowance for loans losses of $ 8,775 and $ 6,467			702,782				532,180
Loans held for sale, at fair value			15,533				8,497
Premises and equipment, net			20,493				21,133
Bank owned life insurance			25,420				24,809
Goodwill			17,532				17,532
Other intangible assets, net			206				383
Mortgage servicing rights			3,726				2,446
Real estate owned, net			1,774				290
Accrued interest and other assets			14,000				11,394
Total assets		$	1,188,027			$	998,465
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing demand		$	264,878			$	182,717
Money market and checking			491,275				405,746
Savings			126,124				99,522
Time			133,750				147,063
Total deposits			1,016,027				835,048
Federal Home Loan Bank borrowings			-				3,000
Subordinated debentures			21,651				21,651
Other borrowings			6,371				17,548
Accrued interest and other liabilities			17,306				12,611
Total liabilities			1,061,355				889,858
Commitments and contingencies			-				-
Stockholders’ equity:
Preferred stock, $ 0.01 par, 200,000 shares authorized; none issued			-				-
Common stock, $ 0.01 par, 7,500,000 shares authorized; 4,750,838 and 4,827,266 shares issued and outstanding at December 31, 2020 and 2019, respectively			48				46
Additional paid-in capital			72,230				69,029
Retained earnings			44,947				34,293
Accumulated other comprehensive income			9,447				5,239
Total stockholders’ equity			126,672				108,607
Total liabilities and stockholders’ equity		$	1,188,027			$	998,465

SeeNotes to Consolidated Financial Statements.

LANDMARKBANCORP, INC. AND SUBSIDIARIES

ConsolidatedStatements of Earnings

		2020				2019				2018
(Dollars in thousands, except per share amounts)		Years ended December 31,
		2020				2019				2018
Interest income:
Loans:
Taxable		$	31,704			$	27,563			$	23,642
Tax-exempt			93				106				244
Investment securities:
Taxable			4,177				5,796				5,299
Tax-exempt			3,279				3,646				3,968
Total interest income			39,253				37,111				33,153
Interest expense:
Deposits			2,105				5,341				3,056
Subordinated debentures			614				970				1,079
Borrowings			50				446				1,230
Total interest expense			2,769				6,757				5,365
Net interest income			36,484				30,354				27,788
Provision for loan losses			3,300				1,400				1,400
Net interest income after provision for loan losses			33,184				28,954				26,388
Non-interest income:
Fees and service charges			8,091				7,737				7,289
Gains on sales of loans, net			15,155				6,353				5,023
Increase in cash surrender value of bank owned life insurance			611				752				644
Gains (losses) on sales of investment securities, net			2,448				( 177	)			20
Other			1,053				1,144				2,595
Total non-interest income			27,358				15,809				15,571
Non-interest expense:
Compensation and benefits			20,657				17,792				16,042
Occupancy and equipment			4,432				4,470				4,333
Data processing			1,831				1,646				1,525
Amortization of intangibles			1,602				1,206				1,111
Professional fees			1,584				1,683				1,677
Advertising			526				566				589
Federal deposit insurance premiums			233				71				291
Foreclosure and real estate owned expense			172				182				100
Other			5,225				5,032				4,697
Total non-interest expense			36,262				32,648				30,365
Earnings before income taxes			24,280				12,115				11,594
Income tax expense			4,787				1,453				1,168
Net earnings		$	19,493			$	10,662			$	10,426
Earnings per share (1):
Basic (1)		$	4.10			$	2.21			$	2.17
Diluted (1)		$	4.10			$	2.20			$	2.17

(1)	All per share amounts have been adjusted to give effect to the 5 % stock dividends paid during December 2020, 2019 and 2018.

SeeNotes to Consolidated Financial Statements.

LANDMARKBANCORP, INC. AND SUBSIDIARIES

ConsolidatedStatements of Comprehensive Income

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Net earnings		$	19,493			$	10,662			$	10,426
Net unrealized holding gains (losses) on available-for-sale securities			8,021				12,048				( 4,721	)
Less reclassification adjustment on (gains) losses included in earnings			( 2,448	)			177				( 20	)
Net unrealized gains (losses)			5,573				12,225				( 4,741	)
Income tax effect on net gains (losses) included in earnings			600				( 43	)			5
Income tax effect on net unrealized holding (gains) losses			( 1,965	)			( 2,952	)			1,157
Other comprehensive income (loss)			4,208				9,230				( 3,579	)
Total comprehensive income		$	23,701			$	19,892			$	6,847

SeeNotes to Consolidated Financial Statements.

LANDMARKBANCORP, INC. AND SUBSIDIARIES

ConsolidatedStatements of Stockholders’ Equity

(Dollars in thousands, except per share amounts)		Common stock				Additional paid-in capital				Retained earnings				Treasury stock				Accumulated other comprehensive income (loss)				Total
Balance at January 1, 2018		$	41			$	57,772			$	30,214			$	-			$	( 405	)		$	87,622
Net earnings			-				-				10,426				-				-				10,426
Other comprehensive loss			-				-				-				-				( 3,579	)			( 3,579	)
Dividends paid ($ 0.69 per share) (1)			-				-				( 3,325	)			-				-				( 3,325	)
Stock-based compensation			-				223				-				-				-				223
Adjustment of common stock investments			-				-				7				-				( 7	)			-
Exercise of stock options, 72,130 shares (2)			1				533				-				-				-				534
Dividends paid ($0.73 per share) (1)
Dividends paid ($0.76 per share) (1)
Exercise of stock options, 3,275 shares
Exercise of stock options, 19,030 shares
Purchase of 106,894 treasury shares
5 % stock dividend, 207,794 shares			2				5,247				( 5,249	)			-				-				-
5% stock dividend, 218,589 shares
5% stock dividend, 225,650 shares
Balance at December 31, 2018			44				63,775				32,073				-				( 3,991	)			91,901
Balance at January 1, 2019			44				63,775				32,073				-				( 3,991 )				91,901
Net earnings			-				-				10,662				-				-				10,662
Other comprehensive income			-				-				-				-				9,230				9,230
Dividends paid ($ 0.73 per share) (1)			-				-				( 3,508	)			-				-				( 3,508	)
Stock-based compensation			-				286				-				-				-				286
Exercise of stock options, 3,275 shares (2)			-				36				-				-				-				36
5 % stock dividend, 218,589 shares			2				4,932				( 4,934	)			-				-				-
Balance at December 31, 2019			46				69,029				34,293				-				5,239				108,607
Balance at January 1, 2020			46				69,029				34,293				-				5,239				108,607
Net earnings			-				-				19,493				-				-				19,493
Other comprehensive income			-				-								-				4,208				4,208
Dividends paid ( $ 0.76 per share) (1)			-				-				( 3,633	)			-				-				( 3,633	)
Stock-based compensation			-				304				-				-				-				304
Purchase of 106,894 treasury shares			-				-				-				( 2,349	)			-				( 2,349	)
Exercise of stock options, 19,030 shares (2)			-				42				-				-				-				42
5 % stock dividend, 225,650 shares			2				2,855				( 5,206	)			2,349				-				-
Balance at December 31, 2020		$	48			$	72,230			$	44,947			$	-			$	9,447			$	126,672

(1)	Dividends per share have been adjusted to give effectto the 5 % stock dividends paid during December 2020, 2019 and 2018.
(2)	Shares from the exercise of stock options are shown net of forfeitures

SeeNotes to Consolidated Financial Statements.

LANDMARKBANCORP, INC. AND SUBSIDIARIES

ConsolidatedStatements of Cash Flows

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Cash flows from operating activities:
Net earnings		$	19,493			$	10,662			$	10,426
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses			3,300				1,400				1,400
Valuation allowance on real estate owned			19				31				12
Amortization of investment security premiums, net			1,223				1,682				1,908
Amortization of purchase accounting adjustment on loans			( 67	)			( 48	)			( 211	)
Amortization of purchase accounting adjustment on subordinated debentures			-				-				167
Amortization of intangibles			1,602				1,206				1,111
Depreciation			987				1,018				1,005
Increase in cash surrender value of bank owned life insurance			( 611	)			( 752	)			( 644	)
Stock-based compensation			304				286				223
Deferred income taxes			( 503	)			( 195	)			969
Net (gain) loss on investment securities			( 2,448	)			177				( 20	)
Net loss (gain) on sales of premises and equipment and foreclosed assets			29				( 52	)			58
Net gains on sales of loans			( 15,155	)			( 6,353	)			( 5,023	)
Proceeds from sale of loans			407,978				207,187				167,001
Origination of loans held for sale			( 402,564	)			( 205,532	)			( 160,729	)
Changes in assets and liabilities:
Accrued interest and other assets			( 2,606	)			817				( 72	)
Accrued interest, expenses and other liabilities			3,833				( 2,427	)			3,657
Net cash provided by operating activities			14,814				9,107				21,238
Cash flows from investing activities:
Net increase in loans			( 175,721	)			( 44,641	)			( 56,915	)
Maturities and prepayments of investment securities			57,903				73,592				54,617
Purchases of investment securities			( 46,540	)			( 53,197	)			( 82,742	)
Proceeds from sale of investment securities			61,163				15,318				21,126
Proceeds from sales of common stock investments			-				-				7
Redemption of bank stocks			3,001				7,852				10,380
Purchase of bank stocks			( 4,365	)			( 6,185	)			( 9,733	)
Proceeds from sales of premises and equipment and foreclosed assets			366				258				424
Proceeds from bank owned life insurance			-				284				-
Purchases of premises and equipment, net			( 359	)			( 1,038	)			( 1,308	)
Net cash used in investing activities			( 104,552	)			( 7,757	)			( 64,144	)
Cash flows from financing activities:
Net increase in deposits			180,979				11,400				58,090
Federal Home Loan Bank advance borrowings			161,170				430,322				635,303
Federal Home Loan Bank advance repayments			( 164,170	)			( 447,322	)			( 646,903	)
Proceeds from other borrowings			1,075				2,302				1,737
Repayments on other borrowings			( 12,252	)			-				-
Proceeds from exercise of stock options			42				36				534
Payment of dividends			( 3,633	)			( 3,508	)			( 3,325	)
Purchase of treasury stock			( 2,349	)			-				-
Net cash provided by (used in) financing activities			160,862				( 6,770	)			45,436
Net increase (decrease) in cash and cash equivalents			71,124				( 5,420	)			2,530
Cash and cash equivalents at beginning of year			13,694				19,114				16,584
Cash and cash equivalents at end of year		$	84,818			$	13,694			$	19,114

(continued)

LANDMARKBANCORP, INC. AND SUBSIDIARIES

ConsolidatedStatements of Cash Flows, Continued

(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Supplemental disclosure of cash flow information:
Cash payments (refunds) received during the year for income taxes		$	4,135			$	722			$	( 1,364	)
Cash paid during the year for interest			3,005				6,795				5,030
Cash paid during the year for operating leases			179				163				143
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to real estate owned		$	1,886			$	482			$	96
Operating lease asset and related liability recorded			-				353				-

SeeNotes to Consolidated Financial Statements.

LANDMARKBANCORP, INC. AND SUBSIDIARIES

Notesto Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

Principlesof Consolidation . The accompanying consolidated financial statements include the accounts of Landmark Bancorp, Inc. andits wholly owned subsidiaries, Landmark National Bank and Landmark Risk Management Inc. All intercompany balances and transactionshave been eliminated in consolidation. The Bank, considered a single operating segment, is principally engaged in the businessof attracting deposits from the general public and using such deposits, together with borrowings and other funds, to originateone-to-four family residential real estate, construction and land, commercial real estate, commercial, agriculture, municipaland consumer loans. Landmark Risk Management, Inc. provides property and casualty insurance coverage to the Company and the Bankfor which insurance may not be currently available or economically feasible in today’s insurance marketplace.

Useof Estimates . The preparation of the consolidated financial statements in conformity with U.S. generally accepted accountingprinciples requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amountsof revenues and expenses during the reporting period. Actual results could differ from those estimates.

BusinessCombinations . At the date of acquisition, the Company records the net assets acquired and liabilities assumed on the consolidatedbalance sheet at their estimated fair values, and goodwill is recognized for the excess purchase price over the estimated fairvalue of acquired net assets. The results of operations for acquired companies are included in the Company’s consolidatedstatements of earnings beginning at the acquisition date. Expenses arising from the acquisition activities are recorded in theconsolidated statements of earnings during the period incurred.

ReserveRequirements . Regulations of the Federal Reserve require reserves to be maintained by all banking institutions accordingto the types and amounts of certain deposit liabilities. These requirements restrict a portion of the amounts shown as consolidatedcash and due from banks from everyday usage in the operation of banks. As of December 31, 2020 and 2019, the Bank did not havea minimum reserve requirement.

CashFlows . Cash and cash equivalents include cash on hand and amounts due from banks with original maturities of fewer than90 days, and are carried at cost. Net cash flows are reported for customer loan and deposit transactions.

InvestmentSecurities . The Company has classified its investment securities portfolio as available-for-sale. Available-for-sale securitiesare recorded at fair value with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’equity, net of taxes. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securitiesare amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepaymentsare anticipated. Realized gains and losses on sales of available-for-sale securities are recorded on a trade date basis and arecalculated using the specific identification method.

TheCompany performs quarterly reviews of the investment portfolio to evaluate investment for other-than-temporary impairment. Theinitial review begins with all securities in an unrealized loss position. The Company’s assessment of other-than-temporaryimpairment is based on its judgment of the specific facts and circumstances impacting each individual security at the time suchassessments are made. The Company reviews and considers all factual information, including expected cash flows, the structureof the security, the credit quality of the underlying assets and the current and anticipated market conditions. Any credit-relatedimpairment on debt securities is recorded through a charge to earnings. Impairment related to other factors is recognized in othercomprehensive income. However, if the Company intends to sell or it is more likely than not that it will be required to sell asecurity in an unrealized loss position before recovery of its amortized costs basis, the entire impairment is recorded througha charge to earnings.

BankStocks . Bank stocks are investments acquired for regulatory purposes and borrowing availability and are accounted forat cost. The cost of such investments represents their redemption value as such investments do not have a readily determinablefair value. The Company evaluates bank stocks for other-than-temporary impairment by analyzing the ultimate recoverability basedon a credit analysis of the issuer.

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AcquiredLoans . Acquired loans are recorded at estimated fair value at the time of acquisition and accounted for under ASC 310-20.The Company’s acquired loans were not acquired with deteriorated credit quality. Estimated fair values of acquired loansare based on a discounted cash flow methodology that considers various factors including the type of loan and related collateral,the expected timing of cash flows, classification status, fixed or variable interest rate, term of loan and whether or not theloan is amortizing, and a discount rate reflecting the Company’s assessment of risk inherent in the cash flow estimates.Discounts or premiums created when acquired loans are recorded at their estimated fair values are accreted or amortized over theremaining term of the loan as an adjustment to the related loan’s yield. Similar to originated loans described below, theaccrual of interest income on acquired loans is discontinued when the collection of principal or interest, in whole or in part,is doubtful.

Loans . Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-offare reported at their outstanding principal balances, net of undisbursed loan proceeds, the allowance for loan losses, and anydeferred fees or costs on originated loans. Origination fees received on loans held in portfolio and the estimated direct costsof origination are deferred and amortized to interest income using the interest method.

Aloan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collectthe scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors consideredby management in determining if a loan is impaired include payment status, probability of collecting scheduled principal and interestpayments when due and value of collateral for collateral dependent loans. Loans that experience insignificant payment delays andpayment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and paymentshortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower,including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of theshortfall in relation to the principal and interest owed. In addition, the Company classifies troubled debt restructurings (“TDR”)as impaired loans. A loan is classified as a TDR if the Company modifies a loan with any concessions, as defined by accountingguidance, to a borrower experiencing financial difficulty. The allowance recorded on impaired loans is measured on a loan-by-loanbasis for commercial, commercial real estate, agriculture and construction and land loans by either the present value of expectedfuture cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fairvalue of the collateral if the loan is collateral dependent. Large groups of homogeneous loans with smaller individual balancesare collectively evaluated for impairment. Accordingly, the Company generally does not separately identify individual consumerand residential loans for impairment disclosures.

InApril 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System, the Office of the Comptrollerof the Currency and the Federal Deposit Insurance Corporation, issued a revised Interagency Statement on Loan Modifications andReporting for Financial Institutions, which, among other things, encouraged financial institutions to work prudently with borrowerswho are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and stated that institutionsgenerally do not need to categorize COVID-19-related modifications as TDRs and that the agencies will not direct supervised institutionsto automatically categorize all COVID-19-related loan modifications as TDRs. The CARES Act and federal regulatory guidance permitbanks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterizedas TDRs if the loan meets certain criteria. The CARES Act requires the borrower to be 30 days or less past due at December 31,2019 and the loan modification be related to the deferral of principal or interest or a change to the interest rate. The federalregulatory guidance criteria indicates that a loan modification should be short-term and the borrower be less than 30 days pastdue at the time of the modification.

Theaccrual of interest on non-performing loans is discontinued at the time the loan is ninety days delinquent, unless the creditis well-secured and in process of collection. Loans are placed on non-accrual or are charged off at an earlier date if collectionof the principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on non-accrualor charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recoverymethod, until qualifying for return to accrual. Loans are evaluated individually and are returned to accrual status when all principaland interest amounts contractually due are brought current and future payments are reasonably assured.

66

Allowancefor Loan Losses . The Company maintains an allowance for loan losses to absorb probable incurred loan losses in the loanportfolio. The allowance for loan losses is increased by charges to earnings and decreased by charge-offs (net of recoveries).The evaluation of the allowance for loan losses groups loans by loan class and includes one-to-four family residential real estate,construction and land, commercial real estate, commercial, agriculture, municipal and consumer loans. Management’s periodicevaluation of the appropriateness of the allowance is based on the Company’s loan loss experience, adjusted for qualitativefactors. The qualitative factors include changes in lending policies and procedures, including changes in underwriting standards;changes in international, national, regional, and local economic and business conditions; changes in the nature, volume, and termsof loans in the portfolio; changes in the lending management and lending staff; changes in the volume and severity of past dueloans, nonaccrual loans, and adversely classified loans; changes in the value of underlying collateral; the existence of and changesin credit concentrations; and other external factors. This evaluation is inherently subjective as it requires estimates that aresusceptible to significant revision as more information becomes available. The allowance is also subject to regulatory examinationsand a determination by the regulatory agencies as to the appropriate level of the allowance.

Inaddition to the general component the allowance consists of a specific component. The specific component relates to loans thatare individually classified as impaired when, based on current information and events, it is probable that the Company will beunable to collect all amounts due according to the contractual terms of the loan agreement.

LoansHeld for Sale . Mortgage loans originated and intended for sale in the secondary market are carried at fair value. Thefair value includes the servicing value of the loans as well as any accrued interest.

Mortgageloans held for sale are generally sold with servicing rights retained. The carrying value of mortgage loans sold is reduced bythe amount allocated to the servicing right. Gains and losses on sales of mortgage loans are based on the difference between theselling price and the carrying value of the related loan sold.

MortgageServicing Rights . When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fairvalue with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparablemortgage servicing contracts, when available or alternatively, is based on a valuation model that calculates the present valueof estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization methodwhich requires servicing rights to be recorded in amortization of intangibles in proportion to, and over the period of, the estimatedfuture net servicing income of the underlying loans.

Servicingrights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determinedby stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investortype. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is lessthan the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particulargrouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are includedin amortization expense on the income statement. The fair values of servicing rights are subject to significant fluctuations asa result of changes in estimated and actual prepayment speeds, default rates and losses.

Transfersof Financial Assets . Transfers of financial assets are accounted for as sales when control over the assets has been relinquished.Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transfereeobtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferredassets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase thembefore their maturity.

MortgageLoan Repurchase Reserve . The Company routinely sells one-to-four family residential mortgage loans to secondary mortgagemarket investors. Under standard representations and warranties clauses in the Company’s mortgage sale agreements, the Companymay be required to repurchase mortgage loans sold or reimburse the investors for credit losses incurred on those loans if a breachof the contractual representations and warranties occurred. The Company establishes a mortgage repurchase liability in an amountequal to management’s estimate of losses on loans for which the Company could have a repurchase obligation or loss reimbursement.The estimated liability incorporates the volume of loans sold in previous periods, default expectations, historical investor repurchasedemand and actual loss severity. Provisions to the mortgage repurchase reserve reduce gains on sales of loans.

Premisesand Equipment . Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Majorreplacements and betterments are capitalized while maintenance and repairs are charged to expense when incurred. Gains or losseson dispositions are reflected in earnings as incurred.

67

BankOwned Life Insurance . The Company has purchased life insurance policies on certain key executives. Bank owned life insuranceis recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrendervalue adjusted for other charges or other amounts due that are probable at settlement.

Goodwilland Intangible Assets . Goodwill is not amortized; however, it is tested for impairment at each calendar year end or morefrequently when events or circumstances dictate. The impairment test compares the carrying value of goodwill to an implied fairvalue of the goodwill, which is based on a review of the Company’s market capitalization adjusted for appropriate controlpremiums as well as an analysis of valuation multiples of recent, comparable acquisitions. The Company considers the result fromeach of these valuation methods in determining the implied fair value of its goodwill. A goodwill impairment would be recordedfor the amount that the carrying value exceeds the implied fair value.

Intangibleassets include core deposit intangibles and lease intangibles. Core deposit intangible assets are amortized over their estimateduseful life of ten years on an accelerated basis. Lease intangible assets are amortized over the life of the lease. When factsand circumstances indicate potential impairment, the Company will evaluate the recoverability of the intangible asset’scarrying value, using estimates of undiscounted future cash flows over the remaining asset life. Any impairment loss is measuredby the excess of carrying value over fair value.

IncomeTaxes . The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for thecurrent year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in anentity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events thathave been recognized in financial statements or tax returns. Uncertain income tax positions will be recognized only if it is morelikely than not that they will be sustained upon examination by taxing authorities, based upon their technical merits. Once thatstandard is met, the amount recorded will be the largest amount of benefit that has a greater than 50 percent likelihood of beingrealized upon ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax benefits as a componentof income tax expense in the consolidated statements of earnings. The Company assesses deferred tax assets to determine if theitems are more likely than not to be realized, and a valuation allowance is established for any amounts that are not more likelythan not to be realized.

LoanCommitments and Related Financial Instruments . Financial instruments include off-balance sheet credit instruments, suchas commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for theseitems represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instrumentsare recorded when they are funded.

LossContingencies . Loss contingencies, including claims and legal actions arising in the ordinary course of business, arerecorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Managementdoes not believe there now are such matters that will have a material effect on the financial statements.

ComprehensiveIncome . Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includesunrealized gains and losses on securities available for sale, net of tax which are also recognized as separate components of equity.

RealEstate Owned . Assets acquired through, or in lieu of, foreclosure are initially recorded at fair value less costs to sellwhen acquired, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumermortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest inthe property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Theseassets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequentto foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Stock-BasedCompensation . TheCompany uses the Black-Scholes option pricing model to estimate the grant date fair value of its stock options, which is recognizedas compensation expense over the option vesting period, on a straight-line basis, which is typically four years. The fairvalue of restricted common stock is equal to the Company’s stock price on the grant date, which is recognized as compensationexpense on a straight-line basis over the vesting period. The Company accounts for forfeitures as they occur.

68

Earningsper Share . Basic earnings per share represent net earnings divided by the weighted average number of common shares outstandingduring the year. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potentialcommon shares had been issued. The diluted earnings per share computation for 2020, 2019 and 2018 excluded 94,632 , 105,041 and 34,028 , respectively, of unexercised stock options because their inclusion would have been anti-dilutive.

Theshares used in the calculation of basic and diluted earnings per share, which have been adjusted to give effect to the 5 % commonstock dividends paid by the Company in December 2020, 2019 and 2018, are shown below:

Schedule of Earnings Per Share, Basic and Diluted

		2020				2019				2018
(Dollars in thousands, except per share amounts)		Years ended December 31,
		2020				2019				2018
Net earnings available to common shareholders		$	19,493			$	10,662			$	10,426
Weighted average common shares outstanding - basic			4,749,830				4,822,288				4,796,615
Assumed exercise of stock options			4,361				14,533				16,704
Weighted average common shares outstanding - diluted			4,754,191				4,836,821				4,813,319
Earnings per share:
Basic		$	4.10			$	2.21			$	2.17
Diluted		$	4.10			$	2.20			$	2.17

DerivativeFinancial Instruments . Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market andforward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. The fair valueof the interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for theexpected exercise of the commitment before the loan is funded. In order to hedge the change in interest rates resulting from itscommitments to fund the loans, the Company enters into forward commitments for the future delivery of mortgage loans when interestrate locks are entered into. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest ratesfrom the date the interest on the loan is locked. Changes in the fair values of these derivatives are included in net gains onsales of loans.

DividendRestriction . Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bankto the holding company or by the holding company to shareholders.

FairValue of Financial Instruments . Fair values of financial instruments are estimated using relevant market information andother assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significantjudgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets forparticular items. Changes in assumptions or in market conditions could significantly affect these estimates.

Reclassifications . Some items in the prior year financial statements were reclassified to the current presentation. Reclassifications hadno effect on prior year net income or stockholders’ equity.

69

(2) Impact of Recent Accounting Pronouncements

InJune 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), commonly referred to as“CECL.” The provisions of the update eliminate the probable initial recognition threshold under current GAAPwhich requires reserves to be based on an incurred loss methodology. Under CECL, reserves required for financial assetsmeasured at amortized cost will reflect an organization’s estimate of all expected credit losses over the expected termof the financial asset and thereby require the use of reasonable and supportable forecasts to estimate future credit losses.Because CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established basedon an organization’s reasonable and supportable estimate of expected credit losses extends to held to maturity debtsecurities. Under the provisions of the update, credit losses recognized on available for sale debt securities will bepresented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for purchased loans. Underprior GAAP, a purchased loan’s contractual balance was adjusted to fair value through a credit discount, and no reservewas recorded on the purchased loan upon acquisition. Since under CECL reserves will be established for purchased loans at thetime of acquisition, the accounting for purchased loans is made more comparable to the accounting for originated loans.Finally, increased disclosure requirements under CECL oblige organizations to present the currently required credit qualitydisclosures disaggregated by the year of origination or vintage. FASB expects that the evaluation of underwriting standardsand credit quality trends by financial statement users will be enhanced with the additional vintage disclosures. In October2019, the FASB approved a change in the effective dates for CECL which delayed the effective date to fiscal years beginningafter December 15, 2022 for smaller reporting companies. Because the Company is a smaller reporting company, the proposeddelay is applicable to the Company, and the Company plans to delay the implementation of CECL until January 1, 2023.Management has initiated an implementation committee that has implemented a process to collect the data and is utilizing avendor solution for the new standard. Initial calculations estimate the effect will be an increase to the allowance for loanlosses upon adoption. However, the size of the overall increase is uncertain at this time. Management will utilize the delayto continue to refine and back test the CECL calculation. The internal controls over financial reporting specifically relatedto CECL are in the design stage and are currently being evaluated.

InJanuary 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for GoodwillImpairment. The amendments in this update simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwillimpairment test. The amendments require an entity to perform its annual, or interim, goodwill impairment test by comparing thefair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carryingamount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit.Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reportingunit when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirement for any reportingunit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to performStep 2 of the goodwill impairment test. The amendments in this ASU are effective for annual or interim goodwill impairment testsin fiscal years beginning after December 15, 2019. In October 2019, the FASB approved a change in the effective dates for ASU2017-04 which delayed the effective date to fiscal years beginning after December 15, 2022 for smaller reporting companies. Becausethe Company is a smaller reporting company, the proposed delay is applicable to the Company, and the Company plans to delay theimplementation of ASU 2017-04 until January 1, 2023. Early adoption of the amendments of this ASU is permitted. The adoption ofASU 2017-04 is not expected to have a material effect on the Company’s operating results or financial condition.

InMay 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reformon Financial Reporting. Reference rate reform relates to the effects undertaken to eliminate certain reference rates such as theLondon Interbank Offered Rate (“LIBOR”) and introduce new reference rates that may be based on larger or more liquidobservations and transactions. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedgingrelationships and other contracts. Generally, ASU 2020-04 would allow entities to consider contract modifications due to referencerate reform to be a continuation of an existing contract; thus, the Company would not have to determine if the modification isconsidered insignificant. The Company is in the process of reviewing loan documentation, along with the transition proceduresit will need in order to implement reference rate reform. While the Company has yet to adopt ASU 2020-04, the standard was effectiveupon issuance and terminates December 31, 2022 such that changes made to contracts beginning on or after January 1, 2023 wouldnot apply. The adoption of ASU 2020-04 is not expected to have a material effect on the Company’s operating results or financialcondition.

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(3) Investment Securities

Asummary of investment securities available-for-sale is as follows:

Schedule of Available-for-sale Securities

(Dollars in thousands)		As of December 31, 2020
						Gross				Gross
		Amortized				unrealized				unrealized				Estimated
		cost				gains				losses				fair value
U. S. treasury securities		$	2,000			$	37			$	-			$	2,037
U. S. federal agency obligations			18,804				138				( 18	)			18,924
Municipal obligations, tax exempt			136,321				6,367				( 12	)			142,676
Municipal obligations, taxable			46,643				2,892				-				49,535
Agency mortgage-backed securities			75,530				3,108				-				78,638
Certificates of deposit			5,460				-				-				5,460
Total		$	284,758			$	12,542			$	( 30	)		$	297,270

		As of December 31, 2019
						Gross				Gross
		Amortized				unrealized				unrealized				Estimated
		cost				gains				losses				fair value
U. S. treasury securities		$	2,300			$	16			$	-			$	2,316
U. S. federal agency obligations			4,015				91				-				4,106
Municipal obligations, tax exempt			142,391				3,513				( 42	)			145,862
Municipal obligations, taxable			45,541				1,293				( 55	)			46,779
Agency mortgage-backed securities			159,908				2,353				( 230	)			162,031
Certificates of deposit			1,904				-				-				1,904
Total		$	356,059			$	7,266			$	( 327	)		$	362,998

Thetables above show that some of the securities in the available-for-sale investment portfolio had unrealized losses, or were temporarilyimpaired, as of December 31, 2020 and 2019. This temporary impairment represents the estimated amount of loss that would be realizedif the securities were sold on the valuation date. Securities which were temporarily impaired are shown below, along with thelength of time in a continuous unrealized loss position.

Schedule of Available for Sale Securities Continuous Unrealized Loss Position Fair Value

(Dollars in thousands)						As of December 31, 2020
						Less than 12 months								12 months or longer								Total
		No. of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		securities				value				losses				value				losses				value				losses
U.S. federal agency obligations			4			$	11,772			$	( 18	)		$	-			$	-			$	11,772			$	( 18	)
Municipal obligations, tax exempt			12				4,191				( 12	)			-				-				4,191				( 12	)
Total			16			$	15,963			$	( 30	)		$	-			$	-			$	15,963			$	( 30	)

						As of December 31, 2019
						Less than 12 months								12 months or longer								Total
		No. of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		securities				value				losses				value				losses				value				losses
Municipal obligations, tax exempt			23			$	5,676			$	( 16	)		$	3,473			$	( 26	)		$	9,149			$	( 42	)
Municipal obligations, taxable			4				2,563				( 55	)			-				-				2,563				( 55	)
Agency mortgage-backed securities			21				15,735				( 43	)			17,137				( 187	)			32,872				( 230	)
Total			48			$	23,974			$	( 114	)		$	20,610			$	( 213	)		$	44,584			$	( 327	)

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TheCompany’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of Federal HomeLoan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and the FHLB. Thereceipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agencyguarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-relatedlosses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was morelikely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Companybelieved that the U.S. federal agency obligations identified in the tables above were temporarily impaired.

TheCompany’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issuedby various municipalities. As of December 31, 2020, the Company did not intend to sell and it is more likely than not that theCompany will not be required to sell its municipal obligations in an unrealized loss position until the recovery of its cost.Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual termsand the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial conditionand other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarilyimpaired.

Thetable below includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backedsecurities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations withor without prepayment penalties. The amortized cost and fair value of investment securities at December 31, 2020 are as follows:

Schedule of Investments Classified by Contractual Maturity Date

(Dollars in thousands)		Amortized				Estimated
		cost				fair value
Due in less than one year		$	12,481			$	12,558
Due after one year but within five years			148,182				153,152
Due after five years but within ten years			61,972				65,783
Due after ten years			62,123				65,777
Total		$	284,758			$	297,270

Salesproceeds and gross realized gains and losses on sales of available-for-sale securities are as follows:

Schedule of Realized Gain (loss)

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Sales proceeds		$	61,163			$	15,318			$	21,126
Realized gains		$	2,449			$	2			$	84
Realized losses			( 1	)			( 179	)			( 64	)
Net realized gains		$	2,448			$	( 177	)		$	20

Securitieswith carrying values of $ 282.2 million and $ 240.0 million were pledged to secure public funds on deposit, repurchase agreementsand as collateral for borrowings at December 31, 2020 and 2019, respectively. Except for U.S. federal agency obligations, no investmentin a single issuer exceeded 10 % of consolidated stockholders’ equity.

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(4) Bank Stocks

Bankstocks primarily consist of restricted investments in FHLB and Federal Reserve Bank (“FRB”) stock. The carrying valueof the FHLB stock at December 31, 2020 was $ 2.4 million compared to $ 1.1 million at December 31, 2019. The carrying value of theFRB stock was $ 1.9 million at both December 31, 2020 and 2019. These securities are not readily marketable and are required forregulatory purposes and borrowing availability. Since there are no available market values, these securities are carried at cost.Redemption of these investments at par value is at the option of the FHLB or FRB, as applicable. Also included in Bank stocksare other miscellaneous investments in the common stock of various correspondent banks which are held for borrowing purposes andtotaled $ 111,000 at December 31, 2020 and 2019.

(5) Loans and Allowance for Loan Losses

Loansconsisted of the following:

Schedule of Loans

		As of December 31,
(Dollars in thousands)		2020				2019
One-to-four family residential real estate loans		$	157,984			$	146,505
Construction and land loans			26,106				22,459
Commercial real estate loans			172,307				133,501
Commercial loans			134,047				109,612
Paycheck protection program loans			100,084				-
Agriculture loans			96,532				98,558
Municipal loans			2,332				2,656
Consumer loans			24,122				25,101
Total gross loans			713,514				538,392
Net deferred loan (fees) costs and loans in process			( 1,957	)			255
Allowance for loan losses			( 8,775	)			( 6,467	)
Loans, net		$	702,782			$	532,180

Thefollowing tables provide information on the Company’s allowance for loan losses by loan class and allowance methodology:

Schedule of Allowance for Credit Losses on Financing Receivables

(Dollars in thousands)
		Year ended December 31, 2020
		One-to-four family residential real estate loans				Construction and land loans				Commercial real estate loans				Commercial loans				Paycheck protection loans				Agriculture loans				Municipal loans				Consumer loans				Total
Allowance for loan losses:
Balance at January 1, 2020		$	501			$	271			$	1,386			$	1,815			$	-			$	2,347			$	7			$	140			$	6,467
Charge-offs			( 251	)			( 191	)			( 131	)			( 292	)			-				( 3	)			-				( 248	)			( 1,116	)
Recoveries			-				-				13				3				-				-				6				102				124
Provision for loan losses			609				101				1,214				862				-				346				( 7	)			175				3,300
Balance at December 31, 2020		$	859			$	181			$	2,482			$	2,388			$	-			$	2,690			$	6			$	169			$	8,775
Allowance for loan losses:
Individually evaluated for loss		$	-			$	-			$	177			$	22			$	-			$	67			$	-			$	-			$	266
Collectively evaluated for loss			859				181				2,305				2,366				-				2,623				6				169				8,509
Total		$	859			$	181			$	2,482			$	2,388			$	-			$	2,690			$	6			$	169			$	8,775
Loan balances:
Individually evaluated for loss		$	914			$	1,137			$	8,119			$	1,639			$	-			$	614			$	36			$	3			$	12,462
Collectively evaluated for loss			157,070				24,969				164,188				132,408				100,084				95,918				2,296				24,119				701,052
Total		$	157,984			$	26,106			$	172,307			$	134,047			$	100,084			$	96,532			$	2,332			$	24,122			$	713,514

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(Dollars in thousands)
		Year ended December 31, 2019
		One-to-four family residential real estate				Construction and land				Commercial real estate				Commercial loans				Agriculture loans				Municipal loans				Consumer loans				Total
Allowance for loan losses:
Balance at January 1, 2019		$	449			$	168			$	1,686			$	1,051			$	2,238			$	7			$	166			$	5,765
Charge-offs			( 56	)			( 31	)			-				( 453	)			-				-				( 285	)			( 825	)
Recoveries			1				-				-				53				-				6				67				127
Provision for loan losses			107				134				( 300	)			1,164				109				( 6	)			192				1,400
Balance at December 31, 2019		$	501			$	271			$	1,386			$	1,815			$	2,347			$	7			$	140			$	6,467
Allowance for loan losses:
Individually evaluated for loss		$	129			$	191			$	103			$	204			$	106			$	-			$	-			$	733
Collectively evaluated for loss			372				80				1,283				1,611				2,241				7				140				5,734
Total		$	501			$	271			$	1,386			$	1,815			$	2,347			$	7			$	140				6,467
Loan balances:
Individually evaluated for loss		$	1,256			$	1,479			$	3,461			$	1,298			$	1,124			$	58			$	4			$	8,680
Collectively evaluated for loss			145,249				20,980				130,040				108,314				97,434				2,598				25,097				529,712
Total		$	146,505			$	22,459			$	133,501			$	109,612			$	98,558			$	2,656			$	25,101			$	538,392

(Dollars in thousands)
		Year ended December 31, 2018
		One-to-four family residential real estate				Construction and land				Commercial real estate				Commercial loans				Agriculture loans				Municipal loans				Consumer loans				Total
Allowance for loan losses:
Balance at January 1, 2018		$	542			$	181			$	1,540			$	1,226			$	1,812			$	8			$	150			$	5,459
Charge-offs			( 32	)			-				-				( 950	)			-				-				( 178	)			( 1,160	)
Recoveries			4				-				1				22				1				2				36				66
Provision for loan losses			( 65	)			( 13	)			145				753				425				( 3	)			158				1,400
Balance at December 31, 2018		$	449			$	168			$	1,686			$	1,051			$	2,238			$	7			$	166			$	5,765
Allowance for loan losses:
Individually evaluated for loss		$	100			$	103			$	67			$	27			$	13			$	-			$	-			$	310
Collectively evaluated for loss			349				65				1,619				1,024				2,225				7				166				5,455
Total		$	449			$	168			$	1,686			$	1,051			$	2,238			$	7			$	166				5,765
Loan balances:
Individually evaluated for loss		$	623			$	1,808			$	3,912			$	1,528			$	717			$	58			$	45			$	8,691
Collectively evaluated for loss			136,272				18,275				135,055				72,761				95,915				2,895				25,383				486,556
Total		$	136,895			$	20,083			$	138,967			$	74,289			$	96,632			$	2,953			$	25,428			$	495,247

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TheCompany’s impaired loans increased $ 3.8 million from $ 8.7 million at December 31, 2019 to $ 12.5 million at December 31,2020. The difference between the unpaid contractual principal and the impaired loan balance is a result of charge-offs recordedagainst impaired loans. The difference in the Company’s non-accrual loan balances and impaired loan balances at December31, 2020 and December 31, 2019 was related to TDRs that are current and accruing interest, but still classified as impaired. Interestincome recognized on a cash basis for impaired loans was immaterial during the years 2020, 2019 and 2018. The following tablespresent information on impaired loans:

Schedule of Impaired Financing Receivables

(Dollars in thousands)
		As of December 31, 2020
		Unpaid contractual principal				Impaired loan balance				Impaired loans without an allowance				Impaired loans with an allowance				Related allowance recorded				Year-to-date average loan balance				Year-to-date interest income recognized
One-to-four family residential real estate loans		$	914			$	914			$	914			$	-			$	-			$	925			$	3
Construction and land loans			2,872				1,137				1,137				-				-				1,211				26
Commercial real estate loans			8,119				8,119				4,302				3,817				177				8,152				8
Commercial loans			1,990				1,639				1,543				96				22				1,984				43
Agriculture loans			829				614				538				76				67				618				67
Municipal loans			36				36				36				-				-				54				1
Consumer loans			3				3				3				-				-				4				-
Total impaired loans		$	14,763			$	12,462			$	8,473			$	3,989			$	266			$	12,948			$	148

		As of December 31, 2019
		Unpaid contractual principal				Impaired loan balance				Impaired loans without an allowance				Impaired loans with an allowance				Related allowance recorded				Year-to-date average loan balance				Year-to-date interest income recognized
One-to-four family residential real estate loans		$	1,297			$	1,256			$	887			$	369			$	129			$	1,291			$	10
Construction and land loans			3,214				1,479				1,288				191				191				1,631				36
Commercial real estate loans			3,461				3,461				3,258				203				103				3,489				478
Commercial loans			1,427				1,298				416				882				204				1,464				11
Agriculture loans			1,339				1,124				613				511				106				1,166				48
Municipal loans			58				58				58				-				-				58				1
Consumer loans			4				4				4				-				-				5				-
Total impaired loans		$	10,800			$	8,680			$	6,524			$	2,156			$	733			$	9,104			$	584

		As of December 31, 2018
		Unpaid contractual principal				Impaired loan balance				Impaired loans without an allowance				Impaired loans with an allowance				Related allowance recorded				Year-to-date average loan balance				Year-to-date interest income recognized
One-to-four family residential real estate loans		$	623			$	623			$	413			$	210			$	100			$	640			$	10
Construction and land loans			3,543				1,808				1,383				425				103				2,689				53
Commercial real estate loans			3,912				3,912				2,120				1,792				67				3,928				487
Commercial loans			1,528				1,528				1,446				82				27				1,537				-
Agriculture loans			932				717				529				188				13				844				52
Municipal loans			58				58				58				-				-				58				1
Consumer loans			45				45				45				-				-				49				-
Total impaired loans		$	10,641			$	8,691			$	5,994			$	2,697			$	310			$	9,745			$	603

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TheCompany’s key credit quality indicator is a loan’s performance status, defined as accruing or non-accruing. Performingloans are considered to have a lower risk of loss. Non-accrual loans are those which the Company believes have a higher risk ofloss. The accrual of interest on non-performing loans is discontinued at the time the loan is ninety days delinquent, unless thecredit is well secured and in process of collection. Loans are placed on non-accrual or are charged off at an earlier date ifcollection of principal or interest is considered doubtful. There were no loans ninety days delinquent and accruing interest atDecember 31, 2020 or December 31, 2019. The following tables present information on the Company’s past due and non-accrualloans by loan class:

Schedule of Past Due Financing Receivables

(Dollars in thousands)
		As of December 31, 2020
		30-59 days delinquent and accruing				60-89 days delinquent and accruing				90 days or more delinquent and accruing				Total past due loans accruing				Non-accrual loans				Total past due and non-accrual loans				Total loans not past due
One-to-four family residential real estate loans		$	262			$	185			$	-			$	447			$	749			$	1,196			$	156,788
Construction and land loans			-				-				-				-				694				694				25,412
Commercial real estate loans			-				-				-				-				8,119				8,119				164,188
Commercial loans			832				-				-				832				874				1,706				132,341
Paycheck protection program loans			-				-				-				-				-				-				100,084
Agriculture loans			206				29				-				235				76				311				96,221
Municipal loans			-				-				-				-				-				-				2,332
Consumer loans			15				1				-				16				3				19				24,103
Total		$	1,315			$	215			$	-			$	1,530			$	10,515			$	12,045			$	701,469
Percent of gross loans			0.19	%			0.03	%			0.00	%			0.22	%			1.47	%			1.69	%			98.31	%

		As of December 31, 2019
		30-59 days delinquent and accruing				60-89 days delinquent and accruing				90 days or more delinquent and accruing				Total past due loans accruing				Non-accrual loans				Total past due and non-accrual loans				Total loans not past due
One-to-four family residential real estate loans		$	79			$	593			$	-			$	672			$	1,088			$	1,760			$	144,745
Construction and land loans			-				-				-				-				898				898				21,561
Commercial real estate loans			1,137				707				-				1,844				1,440				3,284				130,217
Commercial loans			510				68				-				578				1,270				1,848				107,764
Agriculture loans			316				-				-				316				846				1,162				97,396
Municipal loans			-				-				-				-				-				-				2,656
Consumer loans			27				-				-				27				4				31				25,070
Total		$	2,069			$	1,368			$	-			$	3,437			$	5,546			$	8,983			$	529,409
Percent of gross loans			0.39	%			0.25	%			0.00	%			0.64	%			1.03	%			1.67	%			98.33	%

Underthe original terms of the Company’s non-accrual loans, interest earned on such loans for the years 2020, 2019 and 2018,would have increased interest income by $ 380,000 , $ 230,000 and $ 254,000 , respectively. No interest income related to non-accrualloans was included in interest income for the years ended December 31, 2020, 2019 and 2018.

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TheCompany also categorizes loans into risk categories based on relevant information about the ability of the borrowers to servicetheir debt such as current financial information, historical payment experience, credit documentation, public information andcurrent economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk.This analysis is performed on a quarterly basis. Non-classified loans generally include those loans that are expected to be repaidin accordance with contractual loan terms. Classified loans are those that are assigned a special mention, substandard or doubtfulrisk rating using the following definitions:

SpecialMention: Loans are currently protected by the current net worth and paying capacity of the obligor or of the collateral pledgedbut potentially weak. These loans constitute an undue and unwarranted credit risk, but not to the point of justifying a classificationof substandard. The credit risk may be relatively minor, yet constitutes an unwarranted risk in light of the circumstances surroundinga specific asset.

Substandard:Loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loanshave a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinctpossibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful:Loans classified doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic thatweaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionableand improbable.

Thefollowing table provides information on the Company’s risk categories by loan class:

Schedule of Risk Categories by Loan Class

		As of December 31, 2020								As of December 31, 2019
(Dollars in thousands)		Nonclassified				Classified				Nonclassified				Classified
One-to-four family residential real estate loans		$	154,985			$	2,999			$	145,311			$	1,194
Construction and land loans			25,412				694				21,560				899
Commercial real estate loans			161,661				10,646				130,714				2,787
Commercial loans			132,023				2,024				101,678				7,934
Paycheck protection program loans			100,084				-				-				-
Agriculture loans			87,662				8,870				93,259				5,299
Municipal loans			2,332				-				2,656				-
Consumer loans			24,119				3				25,097				4
Total		$	688,278			$	25,236			$	520,275			$	18,117

AtDecember 31, 2020, the Company had nine loan relationships consisting of 21 outstanding loans totaling $ 3.9 million that wereclassified as TDRs compared to nine relationships consisting of thirteen outstanding loans totaling $ 3.6 million that were classifiedas TDRs at December 31, 2019.

During2020, the Company modified the payment terms on an agriculture loan totaling $ 156,000 and classified the restructuring as a TDR.The loans related to a $ 1.6 million loan relationship, consisting of two one-to-our family loans, one construction and land loan,two commercial real estate loans and one commercial loan, were classified as TDRs during 2020 after negotiating restructuringagreements with the borrowers. The restructuring included a charge-off of $ 50,000 . The loans related to one commercial loan relationship,with five loans totaling $ 742,000 , were classified as TDRs during 2020, after the payments were modified to interest only. Allof the loans classified as TDRs were experiencing financial difficulties prior to the COVID-19 pandemic. An agriculture loan,a commercial real estate loan and a one-to-four family residential real estate loan previously classified as TDRs in 2017, 2015and 2016, respectively, paid off during 2020.

TheCompany did not classify any loans as TDRs during 2019. A commercial real estate loan previously classified as a TDR in 2014 paidoff during 2019.

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During2018, the Company classified an agriculture loan totaling $ 64,000 as a TDR after originating a loan to an existing loan relationshipthat was classified as a TDR in 2016. As part of the restructuring the borrower paid off three loans previously classified asTDRs. Since the agriculture loan relationship was adequately secured, no impairments were recorded against the principal as ofDecember 31, 2020. The Company also classified a $ 36,000 commercial loan as a TDR after extending the maturity of the loan during2018. The commercial loan had a $ 8,000 impairment recorded against the principal balance as of December 31, 2020. An agricultureloan relationship consisting of two loans that were originally classified as TDRs during 2015 and a municipal loan that was classifiedas a TDR in 2010 were both paid off in 2018.

Subsequently, the Company evaluates each TDR individually and returns the loanto accrual status when a payment history is established after the restructuring and future payments are reasonably assured. Therewere no loans modified as TDRs for which there was a payment default within 12 months of modification as of December 31, 2020,2019 and 2018. At December 31, 2020, there was a commitment of $ 10,000 to lend additional funds on one constructionand land loan classified as a TDR. The Company did not record any charge-offs against loans classified as TDRs during 2020and recorded a credit provision for loan loss of $ 1,000 against TDRs during 2020. The Companydid not record any charge-offs against loans classified as TDRs during 2019 and recorded a credit provision for loan lossof $ 1,000 against TDRs during 2019. The Companydid not record any charge-offs against loans classified as TDRs during 2018 and recorded a credit provision for loan loss of $ 117,000 against TDRs during 2018. The Companyallocated $ 8,000 and $ 9,000 of the allowance for loan losses recordedagainst loans classified as TDRs at December 31, 2020 and 2019, respectively.

Thefollowing table presents information on loans that were classified as TDRs:

Schedule of Troubled Debt Restructurings On Financing Receivables

(Dollars in thousands)
		As of December 31, 2020												As of December 31, 2019
		Number of loans				Non-accrual balance				Accruing balance				Number of loans				Non-accrual balance				Accruing balance
One-to-four family residential real estate loans			2			$	-			$	165				2			$	-			$	168
Construction and land loans			5				693				443				4				510				581
Commercial real estate loans			2				1,227				-				1				-				2,021
Commercial loans			7				33				765				1				-				28
Agriculture			4				-				538				4				-				278
Municipal loans			1				-				36				1				-				58
Total troubled debt restructurings			21			$	1,953			$	1,947				13			$	510			$	3,134

Asof December 31, 2020, the Company had 6 loan modifications on outstanding loan balances of $ 7.2 million in connection with the COVID-19pandemic that had not yet returned to contractual terms that, per regulatory guidance, are not deemed to be TDRs. These modificationsconsisted of payment deferrals that were applied to either the full loan payment or just the principal component. One commercialreal estate loan totaling $ 3.7 million that was modified was also onnon-accrual status as of December 31, 2020. Consistent with the CARES Act and Joint Interagency Regulatory Guidance, the Companyalso entered into short-term forbearance plans and short-term repayment plans on three one-to-four family residentialmortgage loans totaling $ 366,000 as of December 31, 2020, which were not classified as TDRs.

TheCompany had loans and unfunded commitments to directors and officers, and to affiliated parties, at December 31, 2020 and 2019.A summary of such loans is as follows:

Schedule of Loan to Directors Officers and Affiliated Parties

(Dollars in thousands)		2020
Balance at December 31, 2019		$	14,203
New loans			12,872
Repayments			( 10,981	)
Balance at December 31, 2020		$	16,094

(6) Loan Commitments

TheCompany is a party to financial instruments with off-balance sheet risk in the normal course of business to meet customers’financing needs. These financial instruments consist principally of commitments to extend credit. The Company uses the same creditpolicies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company’s exposureto credit loss in the event of nonperformance by the other party is represented by the contractual amount of those instruments.In the normal course of business, there are various commitments and contingent liabilities, such as commitments to extend credit,letters of credit, and lines of credit, the balance of which are not recorded in the accompanying consolidated financial statements.The Company generally requires collateral or other security on unfunded loan commitments and irrevocable letters of credit. Unfundedcommitments to extend credit, excluding standby letters of credit, aggregated to $ 145.1 million and $ 125.4 million at December31, 2020 and 2019, respectively, and are generally at variable interest rates. Standby letters of credit totaled $ 2.2 millionat December 31, 2020 and $ 1.9 million at December 31, 2019.

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(7) Goodwill and Intangible Assets

TheCompany performed its annual step one impairment test as of December 31, 2020. The fair value of the Company’s single reportingunit was compared to the carrying value of the single reporting unit at the measurement date to determine if any impairment existed.Based on the results of the December 31, 2020 step one impairment test, the Company concluded its goodwill was not impaired.

Asummary of the other intangible assets that continue to be subject to amortization is as follows:

Schedule of Other Intangible Assets and Goodwill

(Dollars in thousands)		As of December 31, 2020
		Gross carrying amount				Accumulated amortization				Net carrying amount
Core deposit intangible assets		$	2,018			$	( 1,838	)		$	180
Lease intangible asset			350				( 324	)			26
Total other intangible assets		$	2,368			$	( 2,162	)		$	206

		As of December 31, 2019
		Gross carrying amount				Accumulated amortization				Net carrying amount
Core deposit intangible assets		$	2,018			$	( 1,707	)		$	311
Lease intangible asset			350				( 278	)			72
Total other intangible assets		$	2,368			$	( 1,985	)		$	383

Thefollowing sets forth estimated amortization expense for core deposit and lease intangible assets for the years ending December31:

Schedule of Finite-lived Intangible Assets, Future Amortization Expense

(Dollars in thousands)		Amortization
		expense
2021			122
2022			58
2023			26
Total		$	206

(8) Mortgage Loan Servicing

Mortgageloans serviced for others are not reported as assets. The following table provides information on the principal balances of mortgageloans serviced for others:

Schedule of Participating Mortgage Loans

(Dollars in thousands)		As of December 31,
		2020				2019
FHLMC		$	639,875			$	509,101
FHLB			28,157				40,462

Custodialescrow balances maintained in connection with serviced loans were $ 5.8 million and $ 4.7 million at December 31, 2020 and 2019,respectively. Gross service fee income related to such loans was $ 1.5 million, $ 1.4 million and $ 1.4 million for the years endedDecember 31, 2020, 2019 and 2018, respectively, and is included in fees and service charges in the consolidated statements ofearnings.

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Activityfor mortgage servicing rights and the related valuation allowance follows:

Schedule of Servicing Asset at Amortized Cost

		2020				2019
(Dollars in thousands)		As of December 31,
		2020				2019
Mortgage servicing rights:
Balance at beginning of year		$	2,446			$	2,495
Additions			2,705				943
Amortization			( 1,425	)			( 992	)
Balance at end of year		$	3,726			$	2,446

AtDecember 31, 2020 and 2019, there was no valuation allowance related to mortgage servicing rights.

Thefair value of mortgage servicing rights was $ 4.4 million and $ 5.2 million at December 31, 2020 and 2019, respectively. Fair valueat December 31, 2020 was determined using discount rates ranging from 8.78 % to 12.00 %, prepayment speeds ranging from 7.10 % to 29.61 %, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 1.36 %.Fair value at December 31, 2019 was determined using discount rates ranging from 9.00 % to 11.00 %, prepayment speeds ranging from 6.00 % to 23.21 %, depending on the stratification of the specific mortgage servicing right, and a weighted average default rateof 1.40 %.

TheCompany had a mortgage repurchase reserve of $ 235,000 at December 31, 2020 and December 31, 2019, which represents the Company’sbest estimate of probable losses that the Company will incur related to the repurchase of one-to-four family residential realestate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of thecontractual representations and warranties occurred. As of December 31, 2020, the Company had no outstanding mortgage repurchaserequests.

(9) Premises and Equipment

Premisesand equipment consisted of the following:

Schedule of Premises and Equipment

OfficeBuildings and Improvements [Member]

Furnitureand Equipment [Member]

		useful lives		2020				2019
(Dollars in thousands)		Estimated		As of December 31,
		useful lives		2020				2019
Land		Indefinite		$	6,279			$	6,279
Office buildings and improvements		10 - 50 years			21,058				21,047
Furniture and equipment		3 - 15 years			8,336				8,227
Automobiles		2 - 5 years			567				651
Total premises and equipment					36,240				36,204
Accumulated depreciation					( 15,747	)			( 15,071	)
Total premises and equipment, net				$	20,493			$	21,133

Depreciationexpense totaled $ 987,000 for the year ended December 31, 2020, and $ 1.0 million during the years ended 2019 and 2018 and was includedin occupancy and equipment expense on the consolidated statements of earnings.

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(10) Deposits

Thefollowing table presents the maturities of time deposits at December 31, 2020:

Schedule of Maturities of Time Deposit

(Dollars in thousands)		2020
Year		Amount
2021		$	112,336
2022			13,784
2023			3,856
2024			1,933
2025			1,838
Thereafter			3
Total		$	133,750

Theaggregate amount of time deposits in denominations of $250,000 or more atDecember 31, 2020 and 2019 was $ 26.3 million and $ 41.3 million, respectively. As of December31, 2020, the Company had no brokered deposits as compared to $ 32.8 million brokered deposits at December31, 2019.

Thecomponents of interest expense associated with deposits are as follows:

Schedule of Interest Expense Associated with Deposits

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Time deposits		$	1,166			$	2,751			$	1,195
Money market and checking			899				2,555				1,833
Savings			40				35				28
Total		$	2,105			$	5,341			$	3,056

(11) Federal Home Loan Bank Borrowings

TheBank has a line of credit, renewable annually each September, with the FHLB under which there were no borrowings at December 31,2020 compared to $ 3.0 million of borrowings as of December 31, 2019. Interest on any outstanding balance on the line of creditaccrues at the federal funds rate plus 0.15 % ( 0.35 % at December 31, 2020). The Company had issued letters of credit through theFHLB totaling $ 66.0 million and $ 30.0 million at December 31 2020 and 2019, respectively to secure municipal deposits. The Companydid not have any term advances from FHLB at December 31, 2020 and December 31, 2019.

Althoughno loans are specifically pledged, the FHLB requires the Bank to maintain eligible collateral (qualifying loans and investmentsecurities) that has a lending value at least equal to its required collateral. At December 31, 2020 and 2019, there was a blanketpledge of loans and securities totaling $ 175.7 million and $ 155.2 million, respectively. At December 31, 2020 and 2019, the Bank’stotal borrowing capacity with the FHLB was approximately $ 123.8 million and $ 113.1 million, respectively. At December 31, 2020and 2019, the Bank’s available borrowing capacity was $ 56.4 million and $ 78.8 million, respectively. The difference betweenthe Bank’s total borrowing capacity and available borrowing capacity is related to the amount of borrowings outstandingand letters of credit issued to collateralized public fund deposits. The available borrowing capacity with the FHLB is collateralbased, and the Bank’s ability to borrow is subject to maintaining collateral that meets the eligibility requirements. Theborrowing capacity is not committed and is subject to FHLB credit requirements and policies. In addition, the Bank must maintaina restricted investment in FHLB stock to maintain access to borrowings.

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(12) Subordinated Debentures

In2003, the Company issued $ 8.2 million of subordinated debentures. These debentures, which are due in 2034 and are currently redeemable,were issued to a wholly owned grantor trust (the “Trust”) formed to issue preferred securities representing undividedbeneficial interests in the assets of the Trust. The Trust then invested the gross proceeds of such preferred securities in thedebentures. The Trust’s preferred securities and the subordinated debentures require quarterly interest payments and havevariable rates, adjustable quarterly. Interest accrues at three month LIBOR plus 2.85 %. The interest rate at December 31, 2020and 2019 was 3.06 % and 4.79 %, respectively.

In2005, the Company issued an additional $ 8.2 million of subordinated debentures. These debentures, which are due in 2036 and arecurrently redeemable, were issued to a wholly owned grantor trust (“Trust II”) formed to issue preferred securitiesrepresenting undivided beneficial interests in the assets of Trust II. Trust II then invested the gross proceeds of such preferredsecurities in the debentures. Trust II’s preferred securities and the subordinated debentures require quarterly interestpayments and have variable rates, adjustable quarterly. Interest accrues at three month LIBOR plus 1.34 %. The interest rate atDecember 31, 2020 and 2019 was 1.56 % and 3.23 %, respectively.

In2013, the Company assumed an additional $ 5.2 million of subordinated debentures as part of the Bank’s acquisition of CitizensBank. These debentures, which are due in 2036 and are currently redeemable, were issued by Citizens Bank’s former holdingcompany to a wholly owned grantor trust, First Capital (KS) Statutory Trust (“Trust III”) formed to issue preferredsecurities representing undivided beneficial interests in the assets of Trust III. Trust III’s preferred securities andthe subordinated debentures require quarterly interest payments and have variable rates, adjustable quarterly. Interest accruesat three month LIBOR plus 1.62 %. The interest rate at December 31, 2020 and 2019 was 1.86 % and 3.55 % respectively.

Whilethese trusts are accounted for as unconsolidated equity investments, a portion of the trust preferred securities issued by thetrusts qualifies as Tier 1 Capital for regulatory purposes.

(13) Other Borrowings

TheCompany has a $ 7.5 million line of credit from an unrelated financial institution maturing on November 1, 2021 , with an interestrate that adjusts daily based on the prime rate less 0.25%. This line of credit has covenants specific to capital and other financialratios, which the Company was in compliance with at December 31, 2020. As of December 31, 2020 and 2019, the Company did no t havean outstanding balance on the line of credit.

AtDecember 31, 2020 and 2019, the Bank had no borrowings through the Federal Reserve discount window, while the borrowing capacitywas $ 103.8 million and $ 17.4 million, respectively. The Bank also has various other federal funds agreements, both secured andunsecured, with correspondent banks totaling approximately $ 30.0 million at December 31, 2020 and 2019. As of December 31, 2020and 2019, there were no borrowings through these correspondent bank federal funds agreements.

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(14) Repurchase Agreements

TheCompany has overnight repurchase agreements with certain deposit customers whereby the Company uses investment securities as collateralfor non-insured funds. These balances are accounted for as collateralized financing and included in other borrowings on the balancesheet.

Repurchaseagreements are comprised of non-insured customer funds, totaling $ 6.4 million at December 31, 2020, and $ 17.5 million at December31, 2019, which were secured by $ 8.7 million and $ 20.1 million of the Bank’s investment portfolio at the same dates, respectively.

Thefollowing is a summary of the balances and collateral of the Company’s repurchase agreements:

Schedule of Repurchase Agreements

(Dollars in thousands)		Years ended December 31,
		2020				2019
Average daily balance during the year		$	11,066			$	15,695
Average interest rate during the year			0.20	%			0.62	%
Maximum month-end balance during the year		$	17,939			$	17,548
Weighted average interest rate at year-end			0.18	%			0.47	%

		As of December 31, 2020
		Overnight and				Up to								Greater
		Continuous				30 days				30-90 days				than 90 days				Total
Repurchase agreements:
U.S. federal agency obligations		$	2,412			$	-			$	-			$	-			$	2,412
Agency mortgage-backed securities			3,959				-				-				-				3,959
Total		$	6,371			$	-			$	-			$	-			$	6,371

		As of December 31, 2019
		Overnight and				Up to								Greater
		Continuous				30 days				30-90 days				than 90 days				Total
Repurchase agreements:
U.S. federal treasury obligations		$	789			$	-			$	-			$	-			$	789
U.S. federal agency obligations			1,978				-				-				-				1,978
Agency mortgage-backed securities			14,781				-				-				-				14,781
Total		$	17,548			$	-			$	-			$	-			$	17,548

Theinvestment securities are held by a third party financial institution in the customer’s custodial account. The Company isrequired to maintain adequate collateral for each repurchase agreement. Changes in the fair value of the investment securitiesimpact the amount of collateral required. If the Company were to default, the investment securities would be used to settle therepurchase agreement with the deposit customer.

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(15) Revenue from Contracts with Customers

Allof the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income.Items outside the scope of ASC 606 are noted as such.

Schedule of Revenue from Contracts with Customers Within Non-interest Income

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Non-interest income:
Service charges on deposits
Overdraft fees		$	2,991			$	3,591			$	3,321
Other			644				585				529
Interchange income			2,604				2,049				1,935
Loan servicing fees (1)			1,534				1,367				1,350
Office lease income (1)			652				642				630
Gains on sales of loans (1)			15,155				6,353				5,023
Bank owned life insurance income (1)			611				752				644
Gains (losses) on sales of investment securities (1)			2,448				( 177	)			20
Gains (losses) on sales of premises and equipment and foreclosed assets			( 29	)			52				( 58	)
Other			748				595				2,177
Total non-interest income		$	27,358			$	15,809			$	15,571

(1)

Not within the scope of ASC 606.

Adescription of the Company’s revenue streams within the scope of ASC 606 follows:

ServiceCharges on Deposit Accounts

TheCompany earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-basedfees, which include services such as ATM usage fees, stop payment charges, statement rendering, and ACH fees, are recognized atthe time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenancefees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period during whichthe Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs.Service charges on deposits are withdrawn from the customer’s account balance.

InterchangeIncome

TheCompany earns interchange fees from debit cardholder transactions conducted through the interchange payment network. Interchangefees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrentlywith the transaction processing services provided to the cardholder.

Gains(Losses) on Sales of Real Estate Owned

TheCompany records a gain or loss from the sale of real estate owned when control of the property transfers to the buyer, which generallyoccurs at the time of an executed deed. When the Company finances the sale of real estate owned to the buyer, the Company assesseswhether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction priceis probable. Once these criteria are met, the real estate owned asset is derecognized and the gain or loss on sale is recordedupon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts thetransaction price and related gain (loss) on sale if a significant financing component is present. There were no sales of realestate owned that were financed by the Company during the years 2020, 2019 or 2018.

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(16) Income Taxes

Incometax expense (benefit) attributable to income from operations consisted of the following:

Schedule of Components of Income Tax Expense (Benefit)

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Current:
Federal		$	4,582			$	1,805			$	396
State			708				( 157	)			( 197	)
Total current			5,290				1,648				199
Deferred:
Federal			( 442	)			( 160	)		$	875
State			( 8	)			22				155
Total deferred			( 450	)			( 138	)			1,030
Deferred tax valuation allowance			( 53	)			( 57	)			( 146	)
Deferred tax remeasurement			-				-				85
Income tax expense		$	4,787			$	1,453			$	1,168

Thereasons for the difference between actual income tax expense (benefit) and expected income tax expense attributable to incomefrom operations at the statutory federal income tax rate were as follows:

Schedule of Effective Income Tax Rate Reconciliation

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Computed “expected” tax expense		$	5,099			$	2,544			$	2,435
(Reduction) increase in income taxes resulting from:
Tax-exempt interest income, net			( 695	)			( 748	)			( 850	)
Deferred tax remeasurement			-				-				85
Excess tax benefit from stock option exercise			( 26	)			-				( 119	)
Bank owned life insurance			( 137	)			( 165	)			( 140	)
Reversal of unrecognized tax benefits, net			( 229	)			( 558	)			( 512	)
State income taxes, net of federal benefit			800				407				364
Investment tax credits			( 28	)			( 15	)			( 24	)
Other, net			3				( 12	)			( 71	)
Income tax (benefit) expense		$	4,787			$	1,453			$	1,168

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Thetax effects of temporary differences that give rise to the significant portions of the deferred tax assets and liabilities atthe following dates were as follows:

Schedule of Deferred Tax Assets and Liabilities

		2020				2019
(Dollars in thousands)		As of December 31,
		2020				2019
Deferred tax assets:
Loans, including allowance for loan losses		$	2,040			$	1,590
Net operating loss carry forwards			273				326
State taxes			614				414
Net deferred loan fees			432				11
Acquisition costs			161				182
Deferred compensation arrangements			66				69
Investments			54				45
Other, net			158				39
Total deferred tax assets			3,798				2,676
Less valuation allowance			( 273	)			( 326	)
Total deferred tax assets, net of valuation allowance			3,525				2,350
Deferred tax liabilities:
Unrealized gain on investment securities available-for-sale			3,065				1,700
Premises and equipment, net of depreciation			500				361
Mortgage servicing rights			777				492
Prepaid expenses			302				157
Intangible assets			278				181
FHLB stock dividends			12				6
Total deferred tax liabilities			4,934				2,897
Net deferred tax liability		$	( 1,409	)		$	( 547	)

TheCompany has Kansas corporate net operating loss carry forwards totaling $ 4.7 million and $ 5.6 million as of December 31, 2020and 2019, respectively, which expire between 2021 and 2027. The Company has recorded a valuation allowance against the Kansascorporate net operating loss carry forwards. A valuation allowance related to the remaining deferred tax assets has not been providedbecause management believes it is more likely than not that the results of future operations will generate sufficient taxableincome to realize the deferred tax assets at December 31, 2020.

Retainedearnings at December 31, 2020 and 2019 include approximately $ 6.3 million for which no provision for federal income tax had beenmade. This amount represents allocations of income to bad debt deductions in years prior to 1988 for tax purposes only. Reductionof amounts allocated for purposes other than tax bad debt losses will create income for tax purposes only, which will be subjectto the then current corporate income tax rate.

TheCompany has unrecognized tax benefits representing tax positions for which a liability has been established. A reconciliationof the beginning and ending amount of the liability relating to unrecognized tax benefits is as follows:

Schedule of Unrecognized Tax Benefits

(Dollars in thousands)		Years ended December 31,
		2020				2019
Unrecognized tax benefits at beginning of year		$	1,416			$	1,472
Gross increases to current year tax positions			1,100				554
Gross decreases to prior year’s tax positions			( 26	)			( 2	)
Lapse of statute of limitations			( 352	)			( 608	)
Unrecognized tax benefits at end of year		$	2,138			$	1,416

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Taxyears that remain open and subject to audit include the years 2017 through 2020 for both federal and state tax purposes. The Companyrecognized $ 352,000 and $ 608,000 of previously unrecognized tax benefitsduring 2020 and 2019, respectively. The gross unrecognized tax benefits of $ 2.1 million and $ 1.4 million at December 31, 2020 and December31, 2019, respectively, would favorably impact the effective tax rate by $ 1.7 million and $ 1.1 million, respectively, if recognized.During 2020, the Company recorded $ 71,000 of income tax expense associated withinterest and penalties. During 2019 and 2018, the Company recorded an income tax benefit of $ 77,000 and $ 119,000 ,respectively, associated with interest and penalties. As of December 31, 2020 and 2019, the Company has accrued interest and penaltiesrelated to the unrecognized tax benefits of $ 325,000 and $ 254,000 ,respectively, which are not included in the table above. The Company believes that it is reasonably possible that a reductionin gross unrecognized tax benefits of up to $ 48,000 is possible during the next 12 monthsas a result of the lapse of the statute of limitations.

(17) Employee Benefit Plans

EmployeeRetirement Plan. Substantially all employees are covered under a 401(k) defined contribution savings plan. Eligible employeesreceive 100 % matching contributions from the Company of up to 6 % of their compensation. Matching contributions by the Companywere $ 750,000 , $ 610,000 and $ 468,000 for the years ended December 31, 2020, 2019 and 2018, respectively.

SplitDollar Life Insurance Agreement. The Company has recognized a liability for future benefits payable under an agreement thatsplits the benefits of a bank owned life insurance policy between the Company and a former employee. The liability totaled $ 42,000 at December 31, 2020 and $ 34,000 at December 31, 2019.

DeferredCompensation Agreements. The Company has entered into deferred compensation and other retirement agreements with certain keyemployees that provide for cash payments to be made after their respective retirements. The obligations under these arrangementshave been recorded at the present value of the accrued benefits. The Company has also entered into agreements with certain directorsto defer portions of their compensation. The balance of accrued benefits under these arrangements was $ 690,000 and $ 612,000 atDecember 31, 2020 and 2019, respectively, and was included as a component of other liabilities in the accompanying consolidatedbalance sheets. The Company recorded expense associated with the deferred compensation agreements of $ 10,000 for the year endedDecember 31, 2020, income of $ 8,000 for the year ended December 31, 2019 and an expense of $ 2,000 for the year ended December31, 2018. The liability balance is also impacted by changes in the value of the underlying assets supporting the agreements fordirectors who have not retired.

(18) Stock Compensation Plan

TheCompany has a stock-based employee compensation plan which allows for the issuance of stock options and restricted common stock,the purpose of which is to provide additional incentive to certain officers, directors, and key employees by facilitating theirpurchase of a stock interest in the Company. Compensation expense related to prior awards is recognized on a straight line basisover the vesting period, which is typically four years . The stock-based compensation cost related to these awards was$ 304,000 , $ 286,000 and $ 223,000 for the years ended December 31, 2020, 2019 and 2018, respectively. The Company recognized taxbenefits of $ 105,000 , $ 71,000 , and $ 194,000 for the years ended December 31, 2020, 2019 and 2018, respectively.

Forstock options, the exercise price may not be less than 100 % of the fair market value of the shares on the date of the grant, andno option shall be exercisable after the expiration of ten years from the grant date. In determining compensation cost, the Black-Scholesoption-pricing model is used to estimate the fair value of options on date of grant. The Black-Scholes model is a closed-end modelthat uses the assumptions outlined below. Expected volatility is based on historical volatility of the Company’s stock.The Company uses historical exercise behavior and other qualitative factors to estimate the expected term of the options, whichrepresents the period of time that the options granted are expected to be outstanding. The risk-free rate for the expected termis based on U.S. Treasury rates in effect at the time of grant.

87

OnMay 20, 2015, our stockholders approved the 2015 Stock Incentive Plan which authorized the issuance of equity awards covering 335,024 shares of common stock, as adjusted for subsequent stock dividends. On August 1, 2018, the Compensation Committee awarded 12,479 , as adjusted for subsequent stock dividends, shares of restricted common stock. The value of the 12,479, as adjusted forsubsequent stock dividends, shares was based on a stock price of $ 25.06 on the date such shares were granted, as adjusted forsubsequent stock dividends. On August 1, 2019, the Compensation Committee awarded 3,766 , as adjusted for subsequent stock dividends,shares of restricted common stock and options to acquire 71,007 , as adjusted for subsequent stock dividends, shares of commonstock. The restricted stock awards vest ratably over one year and the value was based on a stock price of $ 21.26 per share onthe date such shares were granted, as adjusted for subsequent stock dividends. The options vest ratably over four years . On August1, 2020, the Compensation Committee awarded 18,218 , as adjusted for subsequent stock dividends, shares of restricted common stock.The value of the 18,218, as adjusted for subsequent stock dividends, shares was based on a stock price of $ 19.62 on the date suchshares were granted, as adjusted for subsequent stock dividends. The fair value of the options granted were determined using thefollowing weighted-average assumptions as of the grant date:

Schedule of Fair Value of Options Assumed

		Years ended December 31,
		2020		2019				2018
Risk-free interest rate		n/a			1.77	%			n/a
Expected term		n/a			7 year				n/a
Expected stock price volatility		n/a			26.06	%			n/a
Dividend yield		n/a			3.41	%			n/a

Asummary of option activity during 2020 is presented below:

Schedule of Share-based Compensation, Stock Options, Activity

(Dollars in thousands, except per share amounts)						Weighted				Weighted
						average				average
						exercise				remaining				Aggregate
						price				contractual				intrinsic
		Shares				per share				term				value
Outstanding at January 1, 2020			136,340			$	19.87				6.9 years			$	714
Granted			-			$	-
Effect of 5 % stock dividend			5,494
Forfeited/expired			( 20,174	)		$	16.30
Exercised			( 19,030	)		$	10.41
Outstanding at December 31, 2020			102,630			$	21.26				7.3 years			$	202
Exercisable at December 31, 2020			38,338			$	20.33				5.9 years			$	120
Fully vested options at December 31, 2020			38,338			$	20.33				5.9 years			$	120

Additionalinformation about stock options exercised is presented below:

Schedule of Stock Option Exercised Additional Information

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Intrinsic value of options exercised (on exercise date)		$	430			$	42			$	1,523
Cash received from options exercised			42				36				534
Excess tax benefit realized from options exercised		$	32			$	-			$	136

Asof December 31, 2020, there was $ 193,000 of unrecognized compensation cost related to the 64,292 outstanding nonvested optionsthat will be recognized over the following periods:

Schedule of Share-based Compensation Arrangements by Share-based Payment Award

(Dollars in thousands)		2020
Year		Amount
2021		$	96
2022			61
2023			36
2024
Total		$	193

88

Asummary of nonvested restricted common stock activity during 2020 is presented below:

Schedule of Nonvested Share Activity

		Shares				Weighted average grant date price per share
Nonvested restricted common stock at January 1, 2020			14,552			$	23.98
Granted			17,350			$	20.60
Vested			( 8,711	)		$	22.41
Forfeited			( 971	)		$	20.60
Effect of 5 % stock dividend			1,098
Nonvested restricted common stock at December 31, 2020			23,318			$	21.05

Asof December 31, 2020, there was $ 355,000 of total unrecognized compensation cost related to the 23,318 outstanding unvested restrictedshares that will be recognized over the following periods:

Schedule of Share-based Compensation Arrangements by Share-based Payment Award

(Dollars in thousands)		2020
Year		Amount
2021		$	158
2022			96
2023			64
2024			37
Total		$	355

(19) Fair Value of Financial Instruments and Fair Value Measurements

Fairvalue is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principalor most advantageous market for the asset or liability in an orderly transaction between market participants on the measurementdate. There are three levels of inputs that may be used to measure fair values:

Level1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability toaccess as of the measurement date.

Level2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable marketdata.

Level3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participantswould use in pricing an asset or liability.

89

Fairvalue estimates of the Company’s financial instruments as of December 31, 2020 and 2019, including methods and assumptionsutilized, are set forth below:

Schedule of Fair Value, by Balance Sheet Grouping

(Dollars in thousands)		As of December 31, 2020
		Carrying
		amount				Level 1				Level 2				Level 3				Total
Financial assets:
Cash and cash equivalents		$	84,818			$	84,818			$	-			$	-			$	84,818
Investment securities available for sale			297,270				2,037				295,233				-				297,270
Bank stocks, at cost			4,473				n/a				n/a				n/a				n/a
Loans, net			702,782				-				-				718,071				718,071
Loans held for sale			15,533				-				15,533				-				15,533
Accrued interest receivable			4,885				-				1,697				3,188				4,885
Derivative financial instruments			1,796				-				1,796				-				1,796
Financial liabilities:
Non-maturity deposits		$	( 882,277	)		$	( 882,277	)		$	-			$	-				( 882,277	)
Time deposits			( 133,750	)			-				( 134,048	)			-				( 134,048	)
FHLB borrowings			-				-				-				-				-
Subordinated debentures			( 21,651	)			-				( 15,232	)			-				( 15,232	)
Other borrowings			( 6,371	)			-				( 6,371	)			-				( 6,371	)
Accrued interest payable			( 168	)			-				( 168	)			-				( 168	)
Derivative financial instruments			( 466	)			-				( 466	)			-				( 466	)

(Dollars in thousands)		As of December 31, 2019
		Carrying
		amount				Level 1				Level 2				Level 3				Total
Financial assets:
Cash and cash equivalents		$	13,694			$	13,694			$	-			$	-			$	13,694
Investment securities available-for-sale			362,998				2,316				360,682				-				362,998
Bank stocks, at cost			3,109				n/a				n/a				n/a				n/a
Loans, net			532,180				-				-				538,427				538,427
Loans held for sale			8,497				-				8,497				-				8,497
Accrued interest receivable			4,557				2				1,895				2,660				4,557
Derivative financial instruments			532				-				532				-				532
Financial liabilities:
Non-maturity deposits		$	( 687,985	)		$	( 687,985	)		$	-			$	-				( 687,985	)
Time deposits			( 147,063	)			-				( 146,390	)			-				( 146,390	)
FHLB borrowings			( 3,000	)			-				( 3,000	)			-				( 3,000	)
Subordinated debentures			( 21,651	)			-				( 19,527	)			-				( 19,527	)
Other borrowings			( 17,548	)			-				( 17,548	)			-				( 17,548	)
Accrued interest payable			( 404	)			-				( 404	)			-				( 404	)
Derivative financial instruments			( 50	)			-				( 50	)			-				( 50	)

Transfers

TheCompany did not transfer any assets or liabilities among levels during the year ended December 31, 2020 or 2019.

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ValuationMethods for Instruments Measured at Fair Value on a Recurring Basis

Thefollowing table represents the Company’s financial instruments that are measured at fair value on a recurring basis at December31, 2020 and 2019, allocated to the appropriate fair value hierarchy:

Schedule of Fair Value, Assets Measured On Recurring Basis

(Dollars in thousands)						As of December 31, 2020
						Fair value hierarchy
		Total				Level 1				Level 2				Level 3
Assets:
Available-for-sale securities
U. S. treasury securities		$	2,037			$	2,037			$	-			$	-
U. S. federal agency obligations			18,924				-				18,924				-
Municipal obligations, tax exempt			142,676				-				142,676				-
Municipal obligations, taxable			49,535				-				49,535				-
Agency mortgage-backed securities			78,638				-				78,638				-
Certificates of deposit			5,460				-				5,460				-
Loans held for sale			15,533				-				15,533				-
Derivative financial instruments			1,796				-				1,796				-
Liabilities:
Derivative financial instruments			( 466	)			-				( 466	)			-

(Dollars in thousands)						As of December 31, 2019
						Fair value hierarchy
		Total				Level 1				Level 2				Level 3
Assets:
Available-for-sale securities
U. S. treasury securities		$	2,316			$	2,316			$	-			$	-
U. S. federal agency obligations			4,106				-				4,106				-
Municipal obligations, tax exempt			145,862				-				145,862				-
Municipal obligations, taxable			46,779				-				46,779				-
Agency mortgage-backed securities			162,031				-				162,031				-
Certificates of deposit			1,904				-				1,904				-
Loans held for sale			8,497				-				8,497				-
Derivative financial instruments			532				-				532				-
Liabilities:
Derivative financial instruments			( 50	)			-				( 50	)			-

TheCompany’s investment securities classified as available-for-sale include U.S. treasury securities, U.S. federal agency securities,municipal obligations, agency mortgage-backed securities, and certificates of deposit. Quoted exchange prices are available forthe Company’s U.S treasury securities which are classified as Level 1. U.S. federal agency securities and agency mortgage-backedobligations are priced utilizing industry-standard models that consider various assumptions, including time value, yield curves,volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlyingfinancial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in themarketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed inthe marketplace. These measurements are classified as Level 2. Municipal securities are valued using a type of matrix, or grid,pricing in which securities are benchmarked against U.S. treasury rates based on credit rating. These model and matrix measurementsare classified as Level 2 in the fair value hierarchy.

Changesin the fair value of available-for-sale securities are included in other comprehensive income to the extent the changes are notconsidered other-than-temporary impairments. Other-than-temporary impairment tests are performed on a quarterly basis and anydecline in the fair value of an individual security below its cost that is deemed to be other-than-temporary results in a write-downof that security’s cost basis.

91

Mortgageloans originated and intended for sale in the secondary market are carried at estimated fair value. The mortgage loan valuationsare based on quoted secondary market prices for similar loans and are classified as Level 2. Changes in the fair value of mortgageloans originated and intended for sale in the secondary market and derivative financial instruments are included in gains on salesof loans.

Theaggregate fair value, contractual balance (including accrued interest), and gain or loss on loans held for sale were as follows:

Schedule of Fair Value Contractual Balance and Gain Loss On Loans Held for Sale

		As of December 31,
(Dollars in thousands)		2020				2019
Aggregate fair value		$	15,533			$	8,497
Contractual balance			15,151				8,316
Gain		$	382			$	181

TheCompany’s derivative financial instruments consist of interest rate lock commitments and forward commitments for the futuredelivery of these mortgage loans. The fair values of these derivatives are based on quoted prices for similar loans in the secondarymarket. The market prices are adjusted by a factor, based on the Company’s historical data and its judgment about futureeconomic trends, which considers the likelihood that a commitment will ultimately result in a closed loan. These instruments areclassified as Level 2. The amounts are included in other assets or other liabilities on the consolidated balance sheets and gainson sale of loans, net in the consolidated statements of earnings. The total amount of gains and losses from changes in fair valueof derivative financial instruments included in earnings were as follows:

Schedule of Gains and Losses from Changes in Fair Value of Loans Held for Sale

		2020				2019				2018
		As of December 31,
(Dollars in thousands)		2020				2019				2018
Total change in fair value		$	848			$	( 15	)		$	102

ValuationMethods for Instruments Measured at Fair Value on a Nonrecurring Basis

TheCompany does not value its loan portfolio at fair value. Collateral-dependent impaired loans are generally carried at the lowerof cost or fair value of the collateral, less estimated selling costs. Collateral values are determined based on appraisals performedby qualified licensed appraisers hired by the Company and then further adjusted if warranted based on relevant facts and circumstances.The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and incomeapproach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparablesales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputsfor determining fair value. Impaired loans are reviewed and evaluated at least quarterly for additional impairment and adjustedaccordingly, based on the same factors identified above. The loan balance of the Company’s impaired loans was $ 12.5 millionat December 31, 2020 and $ 8.7 million at December 31, 2019, with an allocated allowance of $ 266,000 and $ 733,000 , at December31, 2020 and 2019, respectively.

Realestate owned includes assets acquired through, or in lieu of, foreclosure and land previously acquired for expansion. Real estateowned is initially recorded at the fair value of the collateral less estimated selling costs. Subsequent valuations are updatedperiodically and are based upon independent appraisals, third party price opinions or internal pricing models. The appraisalsmay utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustmentsare routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and incomedata available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determiningfair value. Real estate owned is reviewed and evaluated at least annually for additional impairment and adjusted accordingly,based on the same factors identified above.

92

Thefollowing table presents quantitative information about Level 3 fair value measurements for impaired loans measure at fair valueon a non-recurring basis as of December 31, 2020 and 2019.

Schedule of Fair Value Measurements On Nonrecurring, Valuation Techniques

(Dollars in thousands)
		Fair value				Valuation technique		Unobservable inputs		Range
As of December 31, 2020
Impaired loans:
Commercial real estate		$	3,640			Sales comparison		Adjustment to appraised value			20	%
Commercial loans			74			Sales comparison		Adjustment to comparable sales			0 %- 69	%
Agriculture loans			9			Sales comparison		Adjustment to appraised value			20	%
Real estate owned:
One-to-four family residential real estate			48			Sales comparison		Adjustment to appraised value			10	%
As of December 31, 2019
Impaired loans:
One-to-four family residential real estate		$	240			Sales comparison		Adjustment to appraised value			0 %- 25	%
Commercial real estate			100			Sales comparison		Adjustment to appraised value			15	%
Commercial loans			678			Sales comparison		Adjustment to comparable sales			0 %- 75	%
Agriculture loans			405			Sales comparison		Adjustment to appraised value			0 %- 30	%

(20) Regulatory Capital Requirements

Banksand bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacyguidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities,and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications arealso subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Managementbelieved that as of December 31, 2020, the Company and the Bank met all capital adequacy requirements to which they were subjectat that time.

Promptcorrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantlyundercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributionsare limited, as is asset growth and expansion, and capital restoration plans are required. The Company and the Bank are subjectto the Basel III Rule, which is applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bankand savings and loan holding companies other than “small bank holding companies” (generally, non-public bank holdingcompanies with consolidated assets of less than $ 3.0 billion).

TheBasel III Rule includes a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5 %, a minimum ratio of Tier1 capital to risk-weighted assets of 6.0 %, a minimum ratio of Total Capital to risk-weighted assets of 8.0 %, and a minimum Tier1 leverage ratio of 4.0 %. A capital conservation buffer, equal to 2.5 % of common equity Tier 1 capital, is also established abovethe regulatory minimum capital requirements. The capital conservation buffer increases the common equity Tier 1 capital ratio,and Tier 1 capital and total risk based capital ratios.

Asof December 31, 2020 and December 31, 2019, the most recent regulatory notifications categorized the Bank as well capitalizedunder the regulatory framework for prompt corrective action then in effect. There are no conditions or events since that notificationthat management believes have changed the institution’s category.

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Thefollowing is a comparison of the Company’s regulatory capital to minimum capital requirements in effect at December 31,2020 and 2019:

Schedule of Compliance with Regulatory Capital Requirements for Mortgage Companies

(Dollars in thousands)																		To be
										For capital adequacy								well-capitalized under regulatory
		Actual								purposes								guidelines
		Amount				Ratio				Amount				Ratio (1)				Amount				Ratio
As of December 31, 2020
Leverage		$	121,068				10.70	%		$	45,262				4.0	%		$	56,577				5.0	%
Common Equity Tier 1 Capital			100,068				13.77	%			50,866				7.0	%			47,233				6.5	%
Tier 1 Capital			121,068				16.66	%			61,766				8.5	%			58,133				8.0	%
Total Risk Based Capital			129,983				17.89	%			76,300				10.5	%			72,666				10.0	%
As of December 31, 2019
Leverage		$	106,938				10.94	%		$	39,109				4.0	%		$	48,887				5.0	%
Common Equity Tier 1 Capital			85,938				13.09	%			45,952				7.0	%			42,670				6.5	%
Tier 1 Capital			106,938				16.29	%			55,799				8.5	%			52,517				8.0	%
Total Risk Based Capital			113,545				17.30	%			68,928				10.5	%			65,646				10.0	%

(1)	The required percent for capital adequacy purposes includes a capital conservation buffer of 2.5 % .

Thefollowing is a comparison of the Bank’s regulatory capital to minimum capital requirements in effect at December 31, 2020and 2019:

Schedule of Compliance with Regulatory Capital Requirements Under Banking Regulations

(Dollars in thousands)																		To be
										For capital adequacy								well-capitalized under regulatory
		Actual								purposes								guidelines
		Amount				Ratio				Amount				Ratio (1)				Amount				Ratio
As of December 31, 2020
Leverage		$	118,174				10.47	%		$	45,139				4.0	%		$	56,423				5.0	%
Common Equity Tier 1 Capital			118,174				16.27	%			50,829				7.0	%			47,199				6.5	%
Tier 1 Capital			118,174				16.27	%			61,721				8.5	%			58,091				8.0	%
Total Risk Based Capital			127,089				17.50	%			76,244				10.5	%			72,613				10.0	%
As of December 31, 2019
Leverage		$	104,510				10.72	%		$	38,984				4.0	%		$	48,730				5.0	%
Common Equity Tier 1 Capital			104,510				15.94	%			45,884				7.0	%			42,607				6.5	%
Tier 1 Capital			104,510				15.94	%			55,716				8.5	%			52,439				8.0	%
Total Risk Based Capital			111,117				16.95	%			68,826				10.5	%			65,547				10.0	%

(1)	The required percent for capital adequacypurposes includes a capital conservation buffer of 2.5 % .

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(21) Parent Company Condensed Financial Statements

Thefollowing is condensed financial information of the parent company as of December 31, 2020 and 2019 and for the years endedDecember 31, 2020, 2019 and 2018:

Schedule of Condensed Financial Statements

CondensedBalance Sheets

		2020				2019
(Dollars in thousands)		As of December 31,
		2020				2019
Assets:
Cash and cash equivalents		$	105			$	173
Investment securities			212				239
Investment in subsidiaries			146,896				129,049
Other			1,217				929
Total assets		$	148,430			$	130,390
Liabilities and stockholders’ equity:
Subordinated debentures		$	21,651			$	21,651
Other			107				132
Stockholders’ equity			126,672				108,607
Total liabilities and stockholders’ equity		$	148,430			$	130,390

CondensedStatements of Earnings

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Dividends from Bank		$	6,900			$	4,500			$	3,200
Interest income			21				31				29
Other non-interest income			7				7				7
Interest expense			( 614	)			( 970	)			( 1,078	)
Other expense, net			( 352	)			( 304	)			( 325	)
Earnings before equity in undistributed earnings			5,962				3,264				1,833
Increase in undistributed equity of Bank			13,087				6,801				7,567
Increase in undistributed equity of Nonbank subsidiary			248				338				740
Earnings before income taxes			19,297				10,403				10,140
Income tax benefit			( 196	)			( 259	)			( 286	)
Net earnings			19,493				10,662				10,426
Other comprehensive income (loss)			4,208				9,230				( 3,579	)
Total comprehensive income		$	23,701			$	19,892			$	6,847

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CondensedStatements of Cash Flows

		2020				2019				2018
(Dollars in thousands)		Years ended December 31,
		2020				2019				2018
Cash flows from operating activities:
Net earnings		$	19,493			$	10,662			$	10,426
Increase in undistributed equity of subsidiaries			( 13,335	)			( 7,139	)			( 8,307	)
Amortization of purchase accounting adjustment on subordinated debentures			-				-				167
Other			( 312	)			23				381
Net cash provided by operating activities			5,846				3,546				2,667
Cash flows from investing activities:
Purchase of investment securities			( 2	)			( 1	)			-
Proceeds from sales of investments			28				-				7
Net cash provided by (used in) investing activities			26				( 1	)			7
Cash flows from financing activities:
Proceeds from exercise of stock options			42				36				534
Payment of dividends			( 3,633	)			( 3,508	)			( 3,325	)
Purchase of treasury stock			( 2,349	)			-				-
Net cash used in financing activities			( 5,940	)			( 3,472	)			( 2,791	)
Net (decrease) increase in cash			( 68	)			73				( 117	)
Cash at beginning of year			173				100				217
Cash at end of year		$	105			$	173			$	100

Dividendspaid by the Company are provided through dividends from the Bank. At December 31, 2020, the Bank could distribute dividends ofup to $ 19.9 million without regulatory approvals.The primary source of funds for the Company is dividends from the Bank. Under the National Bank Act, a national bank may pay dividendsout of its undivided profits in such amounts and at such times as the bank’s board of directors deems prudent. Without priorOCC approval, however, a national bank may not pay dividends in any calendar year that, in the aggregate, exceed the bank’syear-to-date net income plus the bank’s retained net income for the two preceding years. The payment of dividends by anyfinancial institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelinesand regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof,the institution would be undercapitalized.

(22) Commitments, Contingencies and Guarantees

Commitmentsto extend credit are legally binding agreements to lend to a borrower provided there are no violations of any conditions establishedin the contract. The Company, as a provider of financial services, routinely issues financial guarantees in the form of financialand performance commercial and standby letters of credit. As many of the commitments are expected to expire without being drawnupon, the total commitment does not necessarily represent future cash requirements (see Note 6).

Thereare no pending legal proceedings to which the Company or the Bank is a party other than ordinary routine litigation incidentalto the Bank’s business. While the ultimate outcome of current legal proceedings cannot be predicted with certainty, it isthe opinion of management that the resolution of these legal actions should not have a material effect on the Company’sconsolidated financial position or results of operations.

(23) COVID-19 Pandemic

TheCOVID-19 pandemic in the United States caused a substantial disruption to the economy, employment and financial markets and isexpected to have a complex and significant adverse impact on the economy, the banking industry and the Company in future fiscalperiods, all subject to a high degree of uncertainty. Additional federal government stimulus, declining COVID-19 cases and thedistribution of vaccines may lead to positive impacts on the economy and employment while new variants of COVID-19 presents risksto the recovery. The Company’s pandemic response plan continues to focus foremost on the safety and well-being of our customersand associates. The COVID-19 pandemic could adversely impact our customers, employees or vendors which may impact our operationsand financial results. The COVID-19 pandemic may cause economic declines in excess of current projections, or if the pandemiclasts longer than currently projected, the Company’s provision for loan losses may remain elevated or increase in futureperiods. The Company expects to see higher loan delinquencies and defaults in future periods as a result of the COVID-19 pandemicand will continue to monitor our allowance for loan losses in light of changing economic conditions related to COVID-19. The COVID-19pandemic may also impact the Company’s deposit balances and service charge income. In addition, the fair value of certainassets may be adversely impacted by the pandemic and the economic downturn, including the fair value of goodwill, mortgage servicingrights and other real estate. These declines could result in impairments in future periods. The pandemic has caused a significantdecline in market interest rates which may cause our net interest margin to decline. At this time, the full impact of the COVID-19pandemic on the Company’s financial statements is uncertain.

ITEM9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM9A. CONTROLS AND PROCEDURES

DisclosureControls and Procedures

Anevaluation was performed under the supervision and with the participation of the Company’s management, including the ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosurecontrols and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of December 31, 2020. Based on thatevaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded thatthe Company’s disclosure controls and procedures were effective.

Management’sReport on Internal Control over Financial Reporting

Managementis responsible for establishing and maintaining adequate internal control over financial reporting (as defined by Rule 13a-15(f)promulgated under the Exchange Act). The Company’s internal control over financial reporting is a process designed underthe supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of the Company’s financial statements for external purposes inaccordance with GAAP.

Becauseof its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projectionsof any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changesin conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Managementhas made a comprehensive review, evaluation, and assessment of the Company’s internal control over financial reporting asof December 31, 2020. In making its assessment of the effectiveness of the Company’s internal control over financial reporting,management used the framework established in Internal-Control Integrated Framework issued by the Committee of Sponsoring Organizationsof the Treadway Commission - 2013. Based on that assessment, management concluded that, as of December 31, 2020, the Company’sinternal control over financial reporting was effective.

Ourauditors are not required to formally opine on the effectiveness of our internal control over financial reporting because theCompany is not an accelerated filer or a large accelerated filer. As a result, this annual report on Form 10-K does not includean attestation report of the Company’s independent registered public accounting firm.

Therewere no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2020 thatmaterially affected or were reasonably likely to materially affect the Company’s internal control over financial reporting.

ITEM9B. OTHER INFORMATION

None

PARTIII.

ITEM10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

TheCompany incorporates by reference the information called for by Item 10 of this Form 10-K from the sections entitled “Proposal1 - Election of Directors,” “Delinquent Section 16(a) Reports” and “Corporate Governance and the Boardof Directors” of the Company’s Proxy Statement for the annual meeting of stockholders to be held May 19, 2021, whichwill be filed with the SEC no later than 120 days after December 31, 2020 (the “2021 Proxy Statement”).

Theexecutive officers of the Company, each of whom is also currently an executive officer of the Bank and all of whom serve at thediscretion of the Board of Directors, are identified below:

Name		Age		Positions with the Company		Held position since
Michael E. Scheopner		59		President and Chief Executive Officer		May 2013/January 2014
Mark A. Herpich		53		Vice President, Secretary,		October 2001
				Chief Financial Officer and Treasurer

Theexecutive officers of the Bank are identified below:

Name		Age		Positions with the Bank		Held position since
Michael E. Scheopner		59		President and Chief Executive Officer		May 2013/January 2014
Mark A. Herpich		53		Executive Vice President, Secretary and Chief Financial Officer		October 2001
Mark J. Oliphant		68		Executive Vice President, Market President-Central Region		February 2013

ITEM11. EXECUTIVE COMPENSATION

TheCompany incorporates by reference the information called for by Item 11 of this Form 10-K from the sections entitled “CorporateGovernance and the Board of Directors,” and “Executive Compensation” of the 2021 Proxy Statement.

ITEM12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

TheCompany incorporates by reference the information called for by Item 12 of this Form 10-K from the section entitled “SecurityOwnership of Certain Beneficial Owners” of the 2021 Proxy Statement.

EquityCompensation Plan Information

Thetable below sets forth the following information as of December 31, 2020 for all equity compensation plans:

(a)

the number of securities to be issued upon the exercise of outstanding options, warrants and rights;

(b)

the weighted-average exercise price of such outstanding options, warrants and rights;

(c)

other than securities to be issued upon the exercise of such outstanding options, warrants and rights, the number of securities remaining available for future issuance under the plans.

EQUITY COMPENSATION PLAN INFORMATION
		Number of securities to be issued upon exercise of outstanding options, warrants and rights				Weighted-average exercise price of outstanding options, warrants and rights				Number of securities remaining available for future issuance (excluding securities reflected in column (a))
Plan category		(a)				(b)				(c)
Equity compensation plans approved by security holders (1)			102,630			$	21.26				180,277
Equity compensation plans not approved by security holders			-				-				-
Total			102,630			$	21.26				180,277

(1)	Reflects outstanding options granted under our 2001 and 2015 Stock Incentive Plans and the remaining share reserve under our 2015 Stock Incentive Plan, each as adjusted for stock dividends.

ITEM13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

TheCompany incorporates by reference the information called for by Item 13 of this Form 10-K from the sections entitled “Proposal1 – Election of Directors,” “Corporate Governance and the Board of Directors” and “Certain Relationshipsand Related Transactions” of the 2021 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

TheCompany incorporates by reference the information called for by Item 14 of this Form 10-K from the section entitled “Proposal2 - Ratification of Crowe LLP as our Independent Registered Public Accounting Firm” of the 2021 Proxy Statement.

PARTIV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM14(a)1 and 2. Financial Statements and Schedules

LANDMARKBANCORP, INC. AND SUBSIDIARY

LISTOF FINANCIAL STATEMENTS

Thefollowing audited Consolidated Financial Statements of the Company and its subsidiaries and related notes and auditors’report are included in Part II, Item 8 of this Report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets – December 31, 2020 and 2019

Consolidated Statements of Earnings – Years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income – Years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows – Years ended December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

Allschedules are omitted because they are not required or are not applicable or the required information is shown in the financialstatements incorporated by reference or notes thereto.

Item15(a)3. Exhibits

Exhibit Number		Description		Incorporated by reference to		Attached hereto
3.1		Amended and Restated Certificate of Incorporation		Exhibit 3.1 to the registrant’s transition report on Form 10-K filed with the SEC on March 29, 2002 (SEC file no. 000-33203)
3.2		Certificate of Amendment of the Amended and Restated Certificate of Incorporation		Exhibit 3.2 to the registrant’s report on Form 10-K filed with the SEC on March 29, 2013 (SEC file no. 000-33203)
3.3		Bylaws		Exhibit 3.3 to the registrant’s Form S-4 filed with the SEC on June 7, 2001 (SEC file no. 333-62466)
4.0		Certain instruments defining the rights of holders of long-term debt of the Company, none of which authorize a total amount of indebtedness in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis, have not been filed as exhibits. The Company hereby agrees to furnish a copy of any of these agreements to the Commission upon request.
4.1		Description of the Company’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934		Exhibit 4.1 to the registrant’s report on Form 10-K filed with the SEC on March 12, 2020 (SEC file no. 000-33203)

10.1*		Employment Agreement effective January 1, 2014 between Michael E. Scheopner, the Company and the Bank		Exhibit 10.2 to the registrant’s Form 8-K filed with the SEC on December 20, 2013 (SEC file no. 000-33203)
10.2*		Employment Agreement effective November 1, 2013 between Mark A. Herpich, the Company and the Bank		Exhibit 10.3 to the registrant’s Form 8-K filed with the SEC on December 20, 2013 (SEC file no. 000-33203)
10.3*		Employment Agreement effective November 1, 2013 between Mark J. Oliphant, the Company and the Bank		Exhibit 10.5 to the registrant’s Form 8-K filed with the SEC on December 20, 2013 (SEC file no. 000-33203)
10.4*		Form of Landmark Bancorp, Inc. 2001 Stock Incentive Plan Non-qualified Stock Option Agreement		Exhibit 10.9 to the registrant’s report on Form 10-K filed with the SEC on March 30, 2005 (SEC file no. 000-33203)
10.5*		Form of Landmark Bancorp, Inc. Deferred Compensation Agreement		Exhibit 10.11 to the registrant’s report on Form 10-K filed with the SEC on March 30, 2005 (SEC file no. 000-33203)
10.6*		Landmark Bancorp, Inc. 2001 Stock Incentive Plan		Exhibit 10.1 to the registrant’s Form S-8 filed with the SEC on February 11, 2003 (SEC file no. 333-103091)
10.7*		Landmark Bancorp, Inc. 2015 Stock Incentive Plan		Exhibit 10.20 to the registrant’s report on Form 10-K filed with the SEC on March 14, 2016 (SEC file no. 000-33203)
10.8*		Form of Landmark Bancorp, Inc. 2015 Stock Incentive Plan Restricted Stock Award Agreement		Exhibit 4.5 to the registrant’s Form S-8 filed with the SEC on May 16, 2016 (SEC file no. 333-211399)
10.9*		Form of Landmark Bancorp, Inc. 2015 Stock Incentive Plan Nonqualified Stock Option Award Agreement		Exhibit 4.6 to the registrant’s Form S-8 filed with the SEC on May 16, 2016 (SEC file no. 333-211399)
10.10*		Form of Landmark Bancorp, Inc. 2015 Stock Incentive Plan Restricted Stock Unit Award Agreement		Exhibit 4.7 to the registrant’s Form S-8 filed with the SEC on May 16, 2016 (SEC file no. 333-211399)
10.11		Business Loan Agreement, Promissory Note and Commercial Pledge Agreement, dated November 1, 2016, between Landmark Bancorp, Inc. and First National Bank of Omaha		Exhibit 10.1 to the registrant’s Form 10-Q filed with the SEC on November 10, 2016 (SEC file no. 000-33203)
10.12		Change in Terms Agreement dated November 1, 2017, between Landmark Bancorp, Inc. and First National Bank of Omaha		Exhibit 10.1 to the registrant’s Form 10-Q filed with the SEC on November 13, 2017 (SEC file no. 000-33203)
10.13		Change in Terms Agreement dated November 1, 2018, between Landmark Bancorp, Inc. and First National Bank of Omaha		Exhibit 10.1 to the registrant’s Form 10-Q filed with the SEC on November 8, 2018 (SEC file no. 000-33203)
10.14		Change in Terms Agreement dated November 1, 2019, between Landmark Bancorp, Inc. and First National Bank of Omaha		Exhibit 10.1 to the registrant’s Form 10-Q filed with the SEC on November 8, 2019 (SEC file no. 000-33203)
10.15		Change in Terms Agreement dated October 30, 2020, between Landmark Bancorp, Inc. and First National Bank of Omaha		Exhibit 10.1 to the registrant’s Form 10-Q filed with the SEC on November 6, 2020 (SEC file no. 000-33203)
13.1		Letter to Stockholders and Corporate Information included in 2020 Annual Report to Stockholders				X
21.1		Subsidiaries of the Company				X
23.1		Consent of Crowe LLP				X
31.1		Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)				X

31.2		Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)				X
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				X
101		Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in inline XBRL: (i) Consolidated Balance Sheets as of December 31, 2020 and 2019; (ii) Consolidated Statements of Earnings for the twelve months ended December 31, 2020, 2019 and 2018; (iii) Consolidated Statements of Comprehensive Income for the twelve months ended December 31, 2020, 2019 and 2018; (iv) Consolidated Statements of Stockholders’ Equity for the twelve months ended December 31, 2020, 2019 and 2018; (v) Consolidated Statements of Cash Flows for the twelve months ended December 31, 2020, 2019 and 2018; and (vi) Notes to Consolidated Financial Statements				X
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)				X

*Indicatesmanagement contract or compensatory plan or arrangement.

Uponwritten request to the President of the Company, P.O. Box 308, Manhattan, Kansas 66505-0308, copies of the exhibits listed aboveare available to stockholders of the Company by specifically identifying each exhibit desired in the request. The Company’sfilings with the SEC are also available free of charge via the Internet at www.sec.gov , the Company’s website at www.landmarkbancorpinc .com or through the investor relations link at the Bank’s website at www.banklandmark.com .

ITEM 16. FORM 10-K SUMMARY

None

SIGNATURES

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.

LANDMARK BANCORP, INC.
(Registrant)
By:	/s/ Michael E. Scheopner		By:	/s/ Mark A. Herpich		March 22, 2021
	Michael E. Scheopner			Mark A. Herpich		date
	President and Chief Executive Officer (Principal Executive Officer)			Vice President, Secretary, Treasurer and Chief Financial Officer
				(Principal Financial and Accounting Officer)

Pursuantto the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalfof the Registrant and in the capacities and on the dates indicated.

SIGNATURE				TITLE
/s/ Michael E. Scheopner		March22, 2021		President,Chief Executive Officer and Director
Michael E. Scheopner		Date		(Principal Executive Officer)
/s/ Patrick L. Alexander		March22, 2021		Chairman of the Board, Director
Patrick L. Alexander		Date
/s/ Mark A. Herpich		March 22, 2021		Vice President, Secretary, Treasurer and Chief Financial Officer
Mark A. Herpich		Date		(Principal Financial and Accounting Officer)
/s/ Richard A. Ball		March 22, 2021		Director
Richard A. Ball		Date
/s/ Brent A. Bowman		March 22, 2021		Director
Brent A. Bowman		Date
/s/ Sarah Hill-Nelson		March 22, 2021		Director
Sarah Hill-Nelson		Date
/s/ Jim W. Lewis		March 22, 2021		Director
Jim W. Lewis		Date
/s/ Sandra J. Moll		March 22, 2021		Director
Sandra J. Moll		Date
/s/ Wayne R. Sloan		March 22, 2021		Director
Wayne R. Sloan		Date
/s/ David H. Snapp		March 22, 2021		Director
David H. Snapp		Date